By Matt Reese
The world of corn and soybean production forever changed in the late 1990s when the first genetically modified soybeans were released. Since then, there is no doubt that traits have revolutionized corn and soybean production, but those same traits have altered the industry in other ways.
The big benefits of traits come with a big price tag in terms of the money required to research and bring them to market. The stakes are high in this high dollar game and once the major players make the huge investment in traits, they are in it to win. Disputes are inevitable, and while the legions of lawyers battle it out, the smaller seed companies that depend on these traits (but cannot afford to develop their own) are caught in the crossfire.
This is the story behind the surprising recent news that DuPont, which owns Pioneer H-Bred International, Inc. (PHI), had acquired Seed Consultants, Inc. (SCI), Ohio’s largest independent seed company. The late December acquisition was part of the PROaccess business strategy that enables PHI to make available its seed genetics to more growers through a network of distributors.
Ultimately, SCI president Chris Jeffries said that the potential for a legal decision to limit or eliminate his company’s ability to access traits was going to be too risky in the future.
“The writing was on the wall, and in this business you have to pick sides. The big guys are suing each other like crazy and we get subpoenaed for our records for these cases every three or four months,” Jeffries said. “I looked at all of the bad things that could happen if somebody loses a lawsuit or somebody acquires somebody else. I don’t want a federal judge determining whether or not we can deliver our seed. Nobody is suing us, but we could end up being collateral damage with all of the big guys fighting each other. If one of these lawsuits goes the wrong way, it could hurt our employees and our customers. Our customers trust us, and I am not taking a chance on letting my customers down.”
Jeffries has long touted the independence of his homegrown seed company that he and Dan Fox started near Washington Court House 20 years ago, speaking out against multi-national companies that have dominated the seed industry in recent years.
“I am going to eat a lot of crow for this decision, but I wanted to do something from a position of strength and not wait until we had to do something. We had a record year. We did not have to do this now,” he said. “I think we could have survived for five or 10 more years, but I did not want to be one of those hard-headed old guys that won’t change until his business doesn’t exist.”
Jeffries feels that the decision will solidify SCI’s position for the long term to the benefit of SCI customers and employees.
“I still want to be working in the seed industry in 20 years. This is what I love to do,” Jeffries said. “This change will allow us to be as big as the biggest when it comes to germplasm and technologies and yet be the same family company we have always been with respect to service, business practices and values. We anticipate no management or personnel changes, and we will continue to operate as an independent business unit. It will be business as usual.”
Jeffries finally chose to work with PHI because the two companies’ values and business philosophies closely align.
“Pioneer is an ideal partner for us. We do a lot of testing of our products focusing on the eastern Corn Belt and they do the greatest amount of testing in the industry,” he said. “And, SCI customers are already planting 95% Supreme EX brand soybeans and 70% Supreme EX brand corn, which are genetics originated from PHI. We’ve worked with Pioneer for three years and the typical guy I work with from PHI is a farm boy who is still connected with the family farm. Those are the people I want to work with. We are a strong regional company and Pioneer does not want that to change.”
“This business is about genetics and traits, but it also is about good people, good relationships and good service. Those are our strengths. We think this decision is going to benefit our customers and our employees or we wouldn’t have done it.”
Many SCI customers were initially very surprised by the news, but have come to accept it.
“I think Chris was worried that customers were not going to be able to get the seed they wanted. I think he was looking out for his customers more than he was for anything else. As far as thinking he was selling it to see if he could make money, I don’t believe that for a second,” said Bill Black, an SCI customer from Pickaway County. “There have been people wanting to buy him because he has been doing so well. As far as I’m concerned he made the right choice and it was a good move. I guess time will tell.”
Moving forward, the expense of the traits that farmers are demanding will certainly continue to favor the big players in the industry with the deepest pockets.
“We thought we’d see a lot of these medium sized companies being bought up because they just could not compete from a technology standpoint,” said Peter Thomison, Ohio State University Extension corn specialist. “But then we saw some of these strong regional companies make themselves viable just by being able to pick and choose from the big companies and find their own niche.”
But with increasing uncertainty for the accessibility of the traits, the smaller companies are being forced to re-think things again.
“In a way, it is the American system. This is the way things evolve. With these new technologies, I think this is the way things will continue to go,” Thomison said. “Some of these smaller companies are not walking away from the non-GMO corn and soybeans, but those are not the only source of income for these seed companies. That can’t be their bread and butter. In light of the trends right now, and looking down the road at some of these issues, merging with the large companies is a way for the smaller companies to maintain viability by minimizing the risks down the road.”
And, ultimately, and independent seed company is nice, but farmers want the best seed, good service, and competitive prices.
“Everybody wants to promote and support the independent small businesses out there, but at the end of the day, we want the best technology and the best performance from incredibly expensive technology that may be beyond the scope of some of these small companies to develop or access consistently,” Thomison said. “To their credit, Seed Consultants did a very effective job lasting this long in this environment. In one respect this is sad, but it is also evolution that produces the seed farmers want to plant.”