Monsanto

Seems to me that there is a bit of a contradiction at work here. If Monsanto believes that GM soy should qualify as a carbon offset under the Clean Development Mechanism, wouldn't that mean that the company would support a strong agreement on emissions at Copenhagen? If a world carbon tax regime or cap-and-trade scheme became reality, wouldn't that make Monsanto's products more valuable? (Providing, of course, that anyone could prove that GM soy plantations or GM corn-derived biofuels really did result in a net decline in greenhouse gas emissions, which seems highly dubious.) But I'm betting the voters in FoE's poll did not stop to think this through. Monsanto has become one of those brands that inspires overwhelming kneejerk antipathy -- the American Petroleum Institute never had a chance, even though API has done far more to fight action on climate change than any biotech company.

And of course, good reasons to distrust Monsanto are legion. I wrote earlier this summer about hints that the U.S. Department of Justice was considering antitrust action against Monsanto, based on the company's near complete monopoly power in huge sectors of the U.S. seed market. On Monday, the Associated Press published a blockbuster expose of Monsanto's anti-competitive practices in the seed business, written by Christopher Leonard (no relation), that makes a darn good case for trust-busting.

Among the goodies dug up by Leonard: When Monsanto licenses its gene traits to independent companies, the terms of its contracts include a clause that requires the licensee to destroy its inventory of seeds in the event of a change of ownership. What this means is that Monsanto's competitors have no chance to bid against Monsanto in any potential buyouts.

Monsanto's provision requiring companies to destroy seeds containing Monsanto's traits if a competitor buys them prohibited DuPont or other big firms from bidding against Monsanto when it snapped up two dozen smaller seed companies over the last five years, said David Boies, a lawyer representing DuPont who previously was a prosecutor on the federal antitrust case against Microsoft Corp.

Competitive bids from companies like DuPont could have made it far more expensive for Monsanto to bring the smaller companies into its fold. But that contract provision prevented bidding wars, according to DuPont.

"If the independent seed company is losing their license and has to destroy their seeds, they're not going to have anything, in effect, to sell," Boies said. "It requires them to destroy things -- destroy things they paid for -- if they go competitive. That's exactly the kind of restriction on competitive choice that the antitrust laws outlaw."

Maybe the Angry Mermaid can help?

Why is this significant? Because after a certain temperature, usually around 86 degrees Fahrenheit, corn yields drop dramatically. And even the most conservative mainstream climate scientist predictions about the effect of global warming include temperature rises that would hammer the corn-growing heartland of the United States.

These insights come from a fascinating new paper, "The Evolution of Heat Tolerance of Corn: Implications for Climate Change" by North Carolina State University's Michael J. Roberts, a professor of Agricultural and Resource Economics, and Wolfram Schlenker, an economist at Columbia University. The researchers take advantage of a 100 years of incredibly detailed information on corn yields and temperature records in Indiana, the third-largest corn-growing state in the U.S.

Since the mildest scenario for climate change would result in heat extremes "worse than the worst of the Dust Bowl years" the question of corn heat tolerance is critical for the future of the American corn belt. Perhaps most alarming:

The... decline in heat tolerance might be due to the fact that maximizing corn plants for average yields also makes them more sensitive to suboptimal growing conditions..."

Which leads to the question "whether recent increases in yields could only be achieved by making plants less heat resistant, or whether future breeding cycles can increase both heat tolerance and average yields at the same time."

Monsanto, I am sure, would answer the latter part of that question with a resounding affirmative. But the alternative is chilling: We have been progressively breeding and engineering crop strains that are less and less able to cope with climate change.

Roberts and Schlenker conclude with an interesting point about crop prices and income inequality, and a slight dig at Michael Pollan. Pollan has argued for years that subsidizing corn production has led to artificially low prices for corn products and thus contributed to undesirable things such as the obesity crisis. In that scenario, higher prices for corn would be better for our health.

But Roberts And Schlenker point out that such would only be true in a world without vast disparities in income. Rich people, or rich countries like the United States, shrug off rising grain prices and continue to merrily go about their carnivorous corn-fed-meat-eating ways. But poor people in poorer countries can't handle even minor price increases, and starve.

If incomes were not so divergent, prices would simply rise until enough people substituted to a presumably more healthy diet with less meat. The main reason climate change impacts on agriculture pose such a great threat lies not just in the size of potential production impacts, but also because massive income inequality limits potential adaptation on the demand side of the market. The greatest hope is an uncertain one: that technological change will obviate the need for behavioral change.

This year, it's a different story. Demand for glyphosate, post-global recession, has plummeted, and production cost pressures have eased as energy prices have fallen. But that hasn't stopped Chinese generic production. In recent months, Monsanto has slashed prices by as much as fifty percent in a desperate attempt to keep market share, and even mulled the idea of divesting itself of the one-time cash cow and spinning it off as its own separate concern.

So what looked like a bottleneck with all kinds of nasty implications for the future of agriculture in a resource-constrained world with billions of upwardly mobile humans demanding more and more food, is suddenly a surfeit. How long the current market abundance will last if the global economy starts growing vigorously again is anyone's guess, but the whole episode offers a good reminder about why generalizing into the future based on today's prices for any given commodity is a pretty risky business.

Monsanto's plan is to concentrate on its genetically engineered seeds business, where profits are higher, and where it can continue to roll out new, more biotechnologically advanced products as the old ones lose patent protection. But you've got to wonder how long it will be before Chinese competitors start selling their own genetically modified organisms.

Putting aside the health and environmental complications that could ensue from cut-throat GMO competition for the moment, one also wonders whether American corn and soy farmers, who currently have essentially no choice but to buy Monsanto seeds, would mind a little monopoly-busting variety.

This is not idle speculation. On Aug. 7, Philip Weiser, a newly appointed deputy assistant attorney general in the antitrust division, gave an important speech in St. Louis, which just happens to be where Monsanto is based. The title of the speech: "Toward a Competition Policy Agenda for Agriculture Markets."

Weiser started off with some historical observations about the Sherman Act, the enabling legislative authority for antitrust enforcement, pointing out that worries about price fixing by "the Beef Trust" in the late 19th century encouraged senators representing agricultural states to support passage of the bill. Weiser then delivered a pair of pointed paragraphs unlikely to be received with smiles at Monsanto HQ. Italics mine.

Over the last twenty years, changes in technology and the marketplace have revolutionized agriculture markets, producing some substantial efficiencies as well as concerns about concentration. Notably, farmers today increasingly turn to patented biotechnology that is used to produce seeds resistant to herbicides and insects, producing larger crop yields than ever before. At the same time, this technological revolution and accompanying market developments have facilitated the emergence of large firms that produce these products, along with challenges for new firms to enter this market.

...For many farmers and consumer advocates, we understand that there are concerns regarding the levels of concentration in the seed industry -- particularly for corn and soybeans. In studying this market, we will evaluate the emerging industry structure, explore whether new entrants are able to introduce innovations, and examine any practices that potentially threaten competition.

I have written before about how Monsanto's growing control of the seed business is ripe for trust-busting treatment. Either by direct ownership or through licensing of its genetically modified traits, Monsanto may dominate as much as 90 percent of the U.S. corn and soybean seed market, to the point that farmers are complaining about the difficulties involved in simply locating non-GMO seed.

Monsanto, of course, has its defenders, who argue that any antitrust enforcement would unfairly punish the company for its successful development of innovative über-corn. Why should we care about the small farmers who can't afford high-priced seed or are struggling to stay organic?

From Dow Jones' Randomly Noted:

Exactly who's getting hurt by the structure and composition of U.S. agribusiness? Not consumers. Americans have enjoyed gloriously low food prices for years. But of course it's not supermarket patrons the DOJ's worried about. It's family farmers — moms, pops and kids living on farms in the midwest, Great Plains and South who have trouble making a living while seed, grain, dairy and livestock distributors and processors rake in all the dough. The Jeffersonian strain in our country's collective consciousness means every few years we wring our hands over the plight of the family farmer. We need to get over it.

As for Monsanto, the rumbling from the DOJ has nothing to do with competitiveness and everything to do with Monsanto's main competitor, DuPont. Monsanto recently sued DuPont for patent infringement, and has a list of grievances against the company a mile long on its corporate Web site. Among the complaints: A PR firm hired by DuPont allegedly forged letters critical of Monsanto and mailed them to congressional legislators, and Monsanto also claims that DuPont has been funding critics of the company for years.

Sure enough, the conference at which Weiser gave his speech was convened by a group called the Organization for Competitive Markets, which bills itself as an advocate for consumers and small farmers against "big agriculture." And yes, OCM has received funding from DuPont.

But no matter what Monsanto would like to think, its legions of critics are not all on the payroll of DuPont. For one thing, from the standpoint of the safety of genetically modified organisms, something which antitrust enforcement would have little to no bearing on directly, both DuPont and Monsanto are viewed with equal suspicion by activists.

Indirectly, however, the implications of antitrust enforcement could be immense. The long-term health effects of GMOs is a hotly contested issue. But the critical point is that Monsanto's domination of the seed market means that, increasingly, farmers — and, ultimately, consumers — have little choice over what they can plant or what they eat. Breaking up that monopoly power is a crucial step in ensuring that multiple varieties of agriculture can contend for their space in the sun.

However, after undershooting the government numbers in November, the ADP changed its methodology, so the past doesn't offer us too much guidance. Still, no wonder the markets are upset this morning, (The Dow was down 185 an hour after opening). On Wednesday, Time Warner announced it was writing off 25 billion worth of losses for the fourth quarter of 2008, citing a decline in advertising revenue for its cable operations, and Intel reported that fourth quarter revenue would decline 23 percent, due to slacking worldwide demand for semiconductors. Two other industrial giants, IBM and Alcoa, both announced imminent job cuts.

"This is shockingly awful," the FT reported one economist's reaction to the ADP numbers. "We await Friday with trepidation."

But doom and gloom do not own the entire corporate universe. The Wall Street Journal reported that Monsanto is doing just fine. The agricultural biotech giant reported record sales and a doubling of profits for its fiscal first quarter, based largely on sales of its Roundup herbicide to Brazil, and genetically modified corn and soybeans.

Are GMO technology and industrial strength herbicides (and pesticides) recession-proof? Or are we still witnessing the lagging effects of the great agricultural commodity price boom of 2007-2008? One might assume that if China's economy continues to collapse, it's hunger for Brazilian soybeans will soon be sated, and Brazil's appetite for Monsanto products would consequently diminish. But then again, recession or no, everyone's gotta eat. For now, while the rest of the business world scrambles to avoid the floodwaters, Monsanto is high and dry.

Make no mistake, the biotechnology industry and big agribusiness corporations are mighty pleased with the prospect of Vilsack as Ag secretary. Grist's Tom Philpott notes that "in 2001, the Biotechnology Industry Organization named him 'governor of the year' for his 'support of the industry's economic growth and agricultural biotechnology research'" and that Vilsack has supported several measures reducing the power of local governments to regulate agribusiness operations. Philpott also points us to the Des Moines Register, which features a handful of illuminating quotes.

"Tom Vilsack was one of the first governors to see the promise of biotechnology. He has a very balanced view of agriculture and understands its potential." -- Ted Crosbie, vice president of global plant breeding and director of Monsanto's Iowa operations

"We are pleased that we will be working with former Gov. Vilsack. He was always a good spokesman for soybean farmers, particularly on biotechnology issues. We are pleased that an Iowan will have the job." -- Kirk Leeds, chief executive officer of the Iowa Soybean Association

As the former governor of one of the nation's greatest corn-growing states, Tom Vilsack is well known as a big supporter of ethanol as an answer to the U.S.'s energy needs. So if you're a critic of biofuels -- for whatever reason -- you are not going to be happy with the Vilsack nomination. But that's only the most obvious point where environmentalists and Vilsack will part ways. There's also bound to be a major flare-up of disappointment from hardcore anti-biotech activists -- especially those who are opposed to genetic modification of natural organisms. And that's where it gets interesting. Because while progressives are very quick to lean on scientific consensus on such issues as global warming, there is also great distrust of scientific assertions that biotechnological advances offer hope for greater agricultural productivity and increased renewable energy output.

How the World Works falls somewhere in the middle of this: I am always skeptical of assertions from private profit-seeking corporations about the safety or sustainability of their own products. But I also believe that there is tremendous upside potential in agricultural biotechnology -- I don't think genetically modified crops are by definition unsafe or a crime against nature. How the World Works embraces the contradictions -- I like my organic vegetables at the local farmer's market and have no problem potentially driving a car fueled by ethanol made from the latest triple-stack-hybrid GM corn designed for maximum energy crop potential.

But the appointment of Vilsack doesn't offer much of an olive branch to my organic side. Vilsack's no Michael Pollan -- he's Big Ag's man, all the way. Biofuels and biotech are clearly going to be part of the Obama administration's path forward, and we can thus expect to hear plenty of teeth-gnashing from green-thinking food activists in the days to come. As Tom Philpott -- who is one of the very best writers on these issues -- concluded this morning:

The decision comes after a wave of hope that Obama might choose a less agribusiness-oriented candidate.

Consider that wave dashed.

UPDATE: Salon's War Room gets Michael Pollan's direct response to the Vilsack nomination.