...breeding, genetic engineering of input attributes.

As the productivity of pesticides and seeds has increased, the concentration of these input industries has also increased. In the 1960s, over 70 basic manufacturers of pesticides were operating in the United States, but mergers and acquisitions have combined those firms into roughly eight major multinational manufacturers (Just 2006). Concentration has increased similarly in the seed industry. Until the 1930s, most commercial seed suppliers were small, family-owned businesses that multiplied seed varieties developed in the public domain (e.g., state agricultural experiment stations). With the development of hybrid corn and with greater intellectual property right protection, the number of private firms engaged in plant breeding grew rapidly at first. But consolidation has prevailed since the early 1990s. By 1997, the share of the U.S. seed sales controlled by the four largest firms reached 92% for cotton, 69% for corn, and 47% for soybeans (Fernandez-Cornejo 2004). On crop-by-crop basis, the seed industry is more concentrated than the pesticide industry (Ollinger and Fernandez-Cornejo 1995), although pesticide markets tend to be more concentrated use-by-use.

Increasing concentration of these industries raises concerns about the impact of market power. Major crop production is increasingly dominated by inputs for which benefits can be appropriated by use of market power. Half of soybean operating costs and a third of corn operating costs are due to seed and pesticide inputs alone (USDA 2006b). A recent study shows that lack of competition in post-patent pesticide markets explains 30-50% of current prices (Just 2006). The U.S. Department of Justice has had similar anticompetitive concerns in the seed industry (Ross 2000).

Increased industry concentration has at least two competing effects presenting a social trade-off. A tendency toward monopoly pricing restricts markets, limits the social benefits of new technologies, and skews benefits away from farmers and consumers. However, economies in research and development (R&D) and other cost savings can arise from mergers and concentration (Williamson 1968). An additional possibility is that concentration leads to political economies of scale in influencing government regulations.

While economists have developed theory and methods to measure market power and analyze effects of concentration, the main limitation is the availability of data. Although several potential sources of data on modern agricultural input markets are available, they vary widely in accessibility, ranging from confidential proprietary data to public data collected by government agencies. In this paper, we first show how concentrated these modern input industries have become and then demonstrate potential economic impacts of concentration in these input markets. Next, we discuss the data needed for reliable economic analysis of these issues and the adequacy of existing sources of data. The need for additional public data is assessed and approaches for obtaining them are explored. We conclude with suggestions regarding how the influence of the American Agricultural Economics Association (AAEA) can be used to support such data collection efforts.

Concentration in the Seed Industry

Until the late 19th century, most U.S. farmers depended on seed saved from their own harvests and did not purchase significant quantities of commercial seed. From 1915-30, seed certification programs began to provide quality assurance, which led to an increase in the role of commercial seed markets. Until the 1930s, most commercial seed suppliers were small, family-owned businesses lacking the financial resources for R&D. Their primary role was to multiply and sell seed varieties developed in the public domain (Duvick 1998; McMullen 1987). Improved variety R&D was carried out almost exclusively by land grant institutions and other public agencies.

The development of hybrid corn varieties, with its inherent capacity to protect returns to private investment, transformed the U.S. seed industry. From 1930 on, the number of seed producers grew rapidly. Some 150 new companies joined...

NOTE: All illustrations and photos have been removed from this article.



More articles from American Journal of Agricultural Economics
Agricultural contracts: data and research needs.(Industry overview), December 01, 2007
Data needs for consumer and retail firm studies., December 01, 2007
Sixty billion gallons by 2030: economic and agricultural impacts of et..., December 01, 2007
Challenges to the development of a dedicated energy crop., December 01, 2007
Renewable energy policy alternatives for the future., December 01, 2007

Looking for additional articles?
Search our database of over 3 million articles.

Looking for more in-depth information on this industry?
Search our complete database of Industry & Market reports by text, subject, publication name or publication date.

About Goliath
Whether you're looking for sales prospects, competitive information, company analysis or best practices in managing your organization, Goliath can help you meet your business needs.

Our extensive business information databases empower business professionals with both the breadth and depth of credible, authoritative information they need to support their business goals. Whether it be strategic planning, sales prospecting, company research or defining management best practices - Goliath is your leading source for accurate information.