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DAVID KRUSE

By Staff | Sep 4, 2009

Theodore Roosevelt believed that government should play a significant role as the referee of market competition, not to pick winners or losers, but to see to it that a free market could make those choices.

Anti-trust laws exist, but have been unenforced and allowed to languish in the shadows of regulatory inactivity. Government hasn’t been doing its job. The referee has been absent.

One result has been the integration of the poultry and hog industries where public markets have been virtually eliminated and access to entry is now controlled by a few commercial entities that dominate the supply chain.

Technology is a good thing. Biotechnology is the hope as to how we continue to feed a growing world population, improving the standard of living of the human race, without exhausting natural resources or degrading the environment.

It is such a key primary asset to the future of world food production that it could be extrapolated that whoever controls biotechnology, the company that owns this technology, controls the lever to strategically move the world in whatever direction benefits its commercial interest.

That’s not a remote possibility. It is a quickly developing reality. A balance must be struck between providing the financial incentive necessary to commercially develop new biotechnology and limiting the rights of ownership against the monopolization and commercial control of the world’s food production system.

There is shrinking competition in ag biotechnology. The industry has few major players. Its resources are concentrated in tight hands and its commercial power is being concentrated as well so that those who safeguard competition are alarmed and challenged.

Monsanto is testing the limits of ag biotech concentration not only in its control of seed patents, but in its control of market access.

Monsanto gives every reason to believe that it will take everything that it can get. Monsanto is not bashful about seeking maximum advantage in control of intellectual property, market access, market structure and enforcing its perceived property rights.

Monsanto deserves to profit from the biotech benefits that it has brought to agriculture and food production; but is there public interest in them dominating seed genetics, production and distribution so that meaningful competition ceases to exist? Do they have the ability to take it all?

Monsanto’s primary competitor, DuPont, thinks so. Monsanto and DuPont have had skirmishes in and outside of the court as each recognize what is at stake, profits of billions of dollars with market share equating to market control.

DuPont suffers from envy almost as much as it does competitive disadvantage with Monsanto. If you look back into a history of corporate conduct, neither of these companies has taught any Sunday school lessons. Monsanto’s production of PCBs is a source of great controversy they would like everyone to forget. Monsanto and DuPont are now increasingly going head to head.

“DuPont is accusing Monsanto of illegal anti-competitive practices, while Monsanto counters that DuPont is engaging in a covert smear campaign that borders on fraud.” DuPont calls Monsanto an illegal monopoly saying, “This is not just a DuPont problem. This is a competition problem.” In that they are right. Monsanto employs an effective legal department to protect that monopoly. As far as producers are concerned, being limited to Monsanto and DuPont for biotechnology traits provides little competition, limiting choice in the market place.

I don’t see DuPont as being different in motive than Monsanto, as each would like to control the seed industry in order to acquire full pricing power from farmers who function as captured clients.

DuPont’s primary problem is that Monsanto is winning. I don’t see an oligopoly as being better than a monopoly. If DuPont and Monsanto control market access, they control what comes to market and how it is priced. I think their market power passed the point of dominance some time ago and the question will be how or if they are pushed back.

This battle is not about adoption of GMOs, although fringe elements would like to make it so.

GMOs are good. Just ask Norman Borlaug. Both the U.S. Department of Agriculture and the Justice department said this month they will launch an examination of competition and antitrust concerns in the seed industry.

The government’s anti-trust enforcement is so rusty that I think the first thing they will have to do is unfreeze the bolts securing the doors closed by previous administrations. The government hasn’t done its regulatory job in such a long time it has forgotten what the job is along with how to do it.

It will take a renaissance in committed effort in order to challenge the ag biotech monopoly. Monsanto says that it welcomes the added anti-trust scrutiny.

Monsanto lawyers have been so successful in surmounting legal challenges to Monsanto’s business plan that they have to be arrogant by now. There is no limit to their financial resources to pursue their ends. If they can beat down this developing anti-trust challenge, who will be able to stop them from dominating the global seed industry and, by extension, gain control of global food production?

They are ready to fight this fight because they think they can win and the reward could be everything.

David Kruse is president of CommStock Investments Inc., author and producer of The CommStock Report, an ag commentary and market analysis available daily by radio and by subscription on DTN/FarmDayta and the Internet.

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