www.checkbiotech.org ; www.raupp.info ; www.czu.cz

Both U.S. corn and soybean growers have found benefits in biotech trait
seed ? greater yield potential, simpler weed and pest control and improved
handling safety, February 2006 by Barb Baylor Anderson.

But who bears the cost of the technology has become a point of
considerable debate, especially in Iight of illegal biotech soybean seed use
in South America the last several years.

Biotech traits, such as the Roundup Ready trait in soybeans, are considered
intellectual property (IP), and are protected by U.S. patents. Part of the
research and development (R&D) cost of the technology is recouped through
technology fees paid by growers in the U.S., but not necessarily by foreign
competitors, including those in Brazil and Argentina.

"Monsanto patented Roundup Ready soybeans in the U.S., but was not able to
obtain patent protection in Argentina. Farmers in Argentina and (until
recently) Brazil have been able to plant Roundup Ready soybeans without
paying the technology fee that U.S. producers have had to pay, and have been
able to keep harvested soybeans for use as seed," says Dermot Hayes, who
together with fellow lowa State University (ISU) economist Sergio Lence
recently completed a comprehensive study on the effect of IP protection on
agricultural seed companies, producers and consumers.

Since the introduction of Roundup Ready soybeans, ISU's Hayes points out
that South American soybean producers have made gains in market share at the
expense of U.S. growers. The report cites American Soybean Association (ASA)
officials who have confirmed, "Brazilian farmers receive all of the
cost-saving and yield-enhancing benefits without paying for the right to use
the technology, and have a distinct comparative advantage over U.S. soybean
farmers in competing in the global soybean market."

A recent report by the Congressional Research Service also cited by the ISU
economists concluded, "The cost savings to South American soybean growers on
the technology fee alone nets out to about $8-9/metric ton ? a considerable
cost advantage over U.S. soybeans in the highly competitive international
soybean market."

In the report, Lence and Hayes contend effective IP protection is needed to
encourage private agricultural seed companies to continue to invest in R&D
that will bring new technologies to farmers worldwide. But at the same time,
the industry must find the balance between enticing new investment and
protecting the farmers helping to pay for it.

"The agricultural seed market is unique," says Lence. "lt's not like the
medical sector where the customer directly consumes the benefits of the
newly developed technology. lnstead, farmer customers sell the resulting
crop from the newly developed technology into a competitive market. Higher
yields encourage them to purchase seed each year."

The model designed by the researchers allows them to calculate the economic
impact on producers and consumers of changes in the level of IP protection
under various scenarios. lt also measures the effect on seed companies, both
while legal protection exists and after protection ends.

The model identified that a level of IP protection exists at which the
combined interests of consumers and producers are complementary to the
interests of seed companies. The model also found a level where the combined
economic benefit to producers and consumers can be increased only at the
expense of the seed companies.

"Our results suggest the optimum level of IP protection is greater than what
existed in the North American market in the late 1990s," says Hayes. "lt
also shows companies need to have incentives to develop new products or
there won't be any. U.S. farmers lose if they pay the R&D and the technology
goes to South America. Companies and property rights need to be protected in
South America, too, so South American farmers have to help pay for R&D and
U.S. farmers pay less."

Lence notes that the study results indicate technology fees that are charged
in one country (the U.S.) and not in another (such as Argentina) are harmful
to producers in the first country when spillover is high.

"Neither producers in the first country nor R&D firms have incentives to
promote, finance or develop technologies that can be easily adopted in
countries with protection," he explains. "The resuits also suggest that this
outcome is unfortunate, because total world welfare is expected to be higher
when transferable R&D is conducted."

[www.cornandsoybeandigest.com]

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