Monsanto = Monopoly?????
I have read several articles about the Department of Justice possibly looking into anti-trust concerns regarding the concentration of seed genetic traits by Monsanto. Many experts believe that Monsanto uses their supplier contracts with other seed companies to unlawfully constrain competition in the seed industry.
Over the last 12 years, Monsanto has gone from having almost no seed business to a dominant position primarily due to their Roundup© Ready gene traits that they have licensed to hundreds of seed companies to use in marketing their seed. These traits allow farmers to apply Roundup© directly without worrying about it killing their crop. This can save substantial costs over having to spray on other chemicals at a later date or using less effective chemicals.
The Capital Press recently had an article on these practices. I am not sure if I totally agree with the slant of the article especially when they talk about the price of seed corn going up by 25% last year. Seed pricing has a very direct relationship to the overall price of corn since if you do not pay a market price, your grower will not grow seed corn, they will grow regular corn. Therefore, since the average price of corn in 2008 was substantially higher than 2007, so seed corn should be much higher.
Also, I am not sure where you draw the line on letting a company enjoy the fruits of its patent versus being a monopoly. The current patent system promotes the exclusive right to market and use your patent for a certain term of years. This allows companies the ability to spend large amounts of money since they know that they will be able to recoup this money if they receive a patent. Thus, they should be able to maximize this value during the limited years of the patent. Monsanto will lose the patent in next 10 years or so and the market will be open to anybody that can make a generic and the price will drop at that time.
There is an overall limit as to how much Monsanto can charge since at some point it would become cheaper not use their seed if the price got too high.
I would be very interested to have feedback from our farmer clients as to whether you believe that Monsanto has an unfair competative advantage or if you are happy using these seeds and would not change. Let us know!
Paul Neiffer is a certified public accountant and business advisor specializing in income taxation, accounting services, and succession planning for farmers and agribusiness processors. Paul is a principal with CliftonLarsonAllen in Walla Walla, Washington, as well as a regular speaker at national conferences and contributor at agweb.com. Raised on a farm in central Washington, he has been immersed in the ag industry his entire life, including the last 30 years professionally. Paul and his wife purchase an 180 acre ranch in 2016 and enjoy keeping it full of animals.
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