Monument Circle Acquisition Corp (MON)

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DuPont Comments Regarding Agriculture and Antitrust Enforcement Issues...

Today, DuPont/Pioneer filed comments with the Departments of Agriculture and Justice on the state of competition, choice, and innovation in the agricultural marketplace. These comments are in response to a joint USDA and DOJ request to better understand this critical industry. They can be found on the Pioneer website, i.e. http://www.pioneer.com/web/site/portal/menuitem.bd3fcde518c788e0e580e580d10093a0/

I was expecting arguments addressing the tension between protection of intellectual property vs unfair trade practices. And, I was expecting the major focus to be upon specific suggestions of regulatory policy for the industry as a whole. Instead, the comment came across as a combination of a press release for Pioneer Hi-bred’s trait pipeline and a specific complaint against Monsanto in particular.

In my opinion, the complaints that are specific to Monsanto’s behavior would be better addressed by the courts. DuPont argues that my position is fine and dandy, but that there is no policy in place to protect agricultural innovation similar to that found for pharmaceuticals. Hence, the opportunity for judicial redress are inadequate.

They reference the Hatch-Waxman Act as a policy guide to protect agricultural innovation. For example:

Obtaining regulatory approvals begins with scientific data on the trait being developed, including its performance in plants, its potential side effects on non-target pests, its inclusion in animal and human diets, and the potential for resistance by target pests. This data generation process takes years to complete and submit to regulatory agencies. Logically then, the process must begin before patent expiration if a generic trait is to reach the market when first permitted. Unlike the pharmaceutical industry, there is no Hatch-Waxman type patent infringement defense for activities reasonably deemed necessary for obtaining regulatory approvals for biotech traits. Accordingly, companies wishing to prepare for independent regulatory submissions risk patent infringement claims in the U.S. if data collection activities are started prior to patent expiration. The data generation process can take an additional two years following patent expiration. Thus, without reform, companies wishing to sell Roundup Ready® post-patent may not even be able to submit the necessary data to foreign governments until some two years after patent expiration.

I did, however, find DuPont’s comment to include a concise summary of the status of the American seed industry, a summary that I have had difficulty formulating on my own. For example DuPont explains:

... there are over 200 Independents that sell corn and/or soybean seed that do not have their own trait development program, and many of which do not have their own breeding programs for developing germplasm. These Independents in-license traits and germplasm from larger companies and breed them to produce finished commercial seed. Once the finished seed is produced, the product is marketed to growers. In some regions of the country, such as the South, finished seed is generally distributed through retail outlets that also sell agricultural chemicals and a wide variety of other agricultural goods and services. In other regions of the country, small local Independents may sell finished seed directly to farmers, while regional or national seed companies may sell finished seed through independent farmer-dealer networks, as well as through retail outlets. Other agricultural products and services – including seed “treatments,” crop advisory services, grain purchasing, and credit – are often provided by many of the same companies involved in the production and distribution of seed.

Nationally, Independents account for approximately 32 percent of the soybean seed sales and 25 percent of the corn seed.

Independents are significant in the route to market for trait developers for several reasons.

First, Independents have special, and usually personal, relationships with the farmers they serve. Many farmers consult with Independents in deciding which traited seeds to plant. Because of the many variables involved in attempting to ensure a successful planting and harvest, Independents frequently elect to concentrate on a limited geographical area. They are often the leading seed suppliers in their area of operation. Farmers, therefore, typically rely on their Independents for products with desired traits, rather than buying their seed from the larger, national companies that also develop traits and germplasm.

Second, the rate of adoption of new traits and seeds can occur slowly. Farmers tend to adopt new seed varieties gradually, and ordinarily they will only switch products after seeing proof that seeds will grow well in local conditions. Even if a trait developer could replicate the Independents’ customer relationships, it faces the difficult prospect of convincing customers to quickly change to new traits and seed varieties based on different germplasm.

Third, many farmers perceive that they will receive the most benefit by remaining with the same seed supplier and brand from year to year.