Wonkery

While I'm wonking out, Salon.com's How the World Works has a really excellent piece about the role of seed companies in the prospective ethanol boom.

If ethanol advocates have their way, half of the current corn crop could be put to use in ethanol, reducing foreign exports and raising food prices here and in famine-susceptible regions. The administration response to these concerns is that "more corn will emerge to ease the pain of higher grain prices, as seed companies improve yields."

As HtWW points out, USDA studies have shown that increasing consolidation in the seed industry has reduced R&D spending, slowing the production of new breeds. The industry is increasingly monolithic, with the four largest companies in corn seed supplying 70% of the seed in 1997, and industry consolidation will only raise that number.

USDA researchers report:

Calculations for corn, soybeans, and cotton indicate that as the seed industry became more concentrated during the late 1990s, private research intensity dropped or slowed. Was there a connection between the concentrating industry and the slowing intensity? Further ERS analysis, using econometric methods, found a simultaneous self-reinforcing relationship. Those companies that survived seed industry consolidation appear to be sponsoring less research relative to the size of their individual markets than when more companies were involved.

And as competition gets weaker, the incentive to invest heavily in such research will decrease. Farmers can get locked into long-term contracts and commitments that make it harder for smaller seed suppliers to enter the market.

It is true that agricultural efficiency has risen steadily over time, but there is no guarantee that such growth will continue without public oversight. Public funding of seed development has lagged in recent years, and has not focused on productivity:

the focus of public research (as shown by USDA’s Current Research Information System) is shifting to minor crops and to public goods such as environmental protection and food safety, areas less attractive to the private sector because of lower profit potential.

This trend hurts farmers and raises food prices, since privately developed seeds cannot be grown and replanted by farmers, but must be purchased again each year, while publicly produced seed can be regrown locally at lower cost. It can also be bred to better handle local characteristics.