“There was something deeply mystifying about the rush of big biotech and chemical companies into theseed business, Monsanto’s headfirst dive in particular . .. It is not, in the lingo of Wall Street, a high margin business.”
-Daniel Charles, Lords of the Harvest: Biotech, Big Money, and the Future of Food.

The first genetically engineered (GE) crops were approved for human consumption in the mid-1990’s. Now, millions of genetically modified meals later, the clamor over GE foods has become a fixture of food policy debate. The parties to the argument generally fall into one of two camps: those who support agricultural biotechnology as a solution to world hunger and the scarcity of environmental resources and those who warn that GE crops are jeopardizing food security and threatening the environment. This article aims to establish new ground in the controversy and contribute to the groundswell of
opposition against claims that “GE crops will allow us to grow more food and feed more people.”
GE crops have little to do with growing food and feeding people. The developers of GE crops are not concerned with nourishing human life, but with commodifying human life. The pharmaceutical industry is investing in agriculture because plants and animals can be genetically engineered to produce human proteins and human organs – “products” that promise profits far exceeding any imaginable from high yielding crops
bearing vitamin-fortified food.

The Financial Failures of Biotechnology

Monsanto, having launched their agricultural biotechnology program in the early 1980’s, finally managed to release their first GE product in 1996. That is, the company spent approximately 15 years and billions of dollars before they saw any return on their investment in genetic science. This is a pattern that continues to this day: in 2006 Monsanto spent $725 million on research and development while earning a net profit of $689 million. This is the product development model that has become institutionalized in the pharmaceutical industry. Companies spend big for several years in the hopes of coming up with a single blockbuster drug that will generate enough revenue to cover all their sunk costs while delivering a handsome profit. This may be a sustainable business model for the pharmaceutical industry considering the huge size of the market
– the world spent $550 billion on drugs in 2004 – but it hardly makes sense when addressing the traditionally low margin seed business. “Compare agriculture to pharmaceuticals; any new drug that improves a patient’s health, no matter how slight
the effect, can be worth billions. In agriculture, a new gene has to have the effect of a sledgehammer or no one will notice.” Pfizer, Monsanto’s parent company, made $12.9 billion in 2006 from a single drug, Lipitor, an amount double the revenue of the entire market for GE seeds.Agricultural biotechnology has been financed by the promise of future profits from products unrelated to food. As Daniel Charles notes in Lords of the Harvest, “Few, if any,
companies that heavily invested in biotechnology for agriculture have recovered that investment through sales of genetically engineered product.” And this observation extends to the biotechnology industry as a whole. In its almost 30 year history, the industry has never been profitable. During this time, the biotech industry has sustained cumulative net losses of more than $40 billion while investors bought close to $100 billion in stock. In 2005 alone, the global biotechnology industry racked up a collective loss of $4.3 billion. Agricultural biotechnology is hemorrhaging money because they have invested enormous sums in cheap commodities – seeds – whose genetically engineered, value-added components offer negligible advantages over conventional varieties. Agriculture is an industry marked by low-margin products, high development costs, and long lead times. It is not a blockbuster business and never will be because investing in
products that augment farm production results in an inescapable contradiction: the demand for food is inelastic; fluctuations in price are unlikely to be met by changes in the frequency of consumption. This phenomenon, often simply referred to as the “fixed stomach,” means that when supplies increase and food prices fall, consumers do not necessarily buy more groceries and eat more food.
Decades of agricultural innovation have resulted in a long decline in international food prices as production has grown faster than demand. In the United States, between 1913 and 1996 the real cost of food at retail level declined 35 percent. The food processing
industry is enormously profitable but they are not directly engaged in agriculture. The industry simply exploits their market position as the middle man between farmers and consumers, buying cheap and selling dear. But the value of seeds is capped by the value of the foods they will become. Farmers will not spend more on seeds than they expect to recoup from the sale of their crops.

Seed R&D as a Means to Monopolizing Genetic Science

The meager returns from seed sales hardly matter to the giant pharmaceutical conglomerates. Food is merely a conduit through which they hope to develop and monopolize the basic technologies that will then be used to create more valuable products. As David Goodman et al. note in their groundbreaking work From Farming to
Biotechnology, “The ultimate prize is domination and proprietary ownership of the scientific knowledge and process engineering technology required to control the complex biological reactions and microbial activities.” These “proprietary technology platforms . . . have become the end products themselves” because controlling the enabling technology is more important than owning the genetic material itself. In the words of the former CEO of Monsanto, Robert Shapiro, “We are learning about biology at a level and at a rate that is absolutely unprecedented in human history. There is an enormous space to be filled, and the stakes are very high. We want to be able to occupy and hold the most valuable territory.”
Leading firms such as Monsanto, Novartis, and DuPont have sought to “develop and amass patent portfolios that are broad enough to bar entry by new players and deep enough in terms of their control over basic technologies to give them substantial economic power in key markets.” In a study entitled Impact of Industry Concentration
on Innovation in the U.S. Plant Biotech Industry published in 2000, the authors found that the largest firms have been enormously successful in pursuit of these goals. Analysis shows that new firm entry in the “innovation market” is declining, and research and investment is falling in all but the top four firms. Entry into the field of biotechnology is becoming increasingly difficult, as the major players jockey for position. To take but one example, in the early 90’s Agracetus was granted a patent covering all transgenic cotton.
Since then, anyone making any kind of genetic modifications to cotton must seek permission from and pay royalties to Agracetus. The pharmaceutical conglomerates are investing disproportionately large sums in agricultural biotechnology because recent findings indicate that different species share similar gene constructs. For example, we share 99 percent of our genome with chimpanzees and 31 percent of our genes are interchangeable with those of yeast. This discovery has given birth to projects such as the National Plant Genome Initiative which introduced the term “reference species” to suggest that the genomic map of a single plant species might serve as a “reference” for decoding the genomes of other plant species and maybe even humans. As William Boyd explains in his book chapter “Wonderful Potencies: Deep Structure and the Problem of Monopoly in Agricultural Biotechnology,” The sequences of model organisms . . . are
intended to provide the Rosetta stone of sorts for interpreting the genomes of more complex organisms. Genomics thus holds out the promise of a grand unification in biology, providing the key to the basic processes of gene function and protein synthesis common to all organisms.

Extracted from “How Food Became a Casualty of Biotechnology’s Promise“, by By Michael Heimbinder, Fellow, Oakland Institute.
This article continues in: “Biotechnology’s Promise“

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