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More on Monsanto's Acquisition of Seminis, World's Largest Vegetable Seed Company

By Matthew Dillon, The Seed Alliance

"And We Have the Seeds"
Monsanto Purchases World's Largest Vegetable Seed Company

"Monsanto Company to Acquire Seminis, Inc., a Leading Vegetable and Fruit
Seed Company

Acquisition Expected to Add Near-term Income Growth and Diversity to
Monsanto's Seed Portfolio

ST. LOUIS (Jan. 24, 2005) - Monsanto Company (NYSE: MON) announced today
that it signed a definitive agreement to acquire Seminis, Inc., for $1.4
billion in cash and assumed debt.

(From Monsanto Press Release)

Monsanto Goes Healthy?

The news of Monsanto's agreement to purchase Seminis has received little
attention from the media other than the financial pages and a few seed
industry and anti-globalization web sites. But then again, why should it?
How many consumers ­ of food or seed ­ have even heard of Seminis? And yet,
as Seminis spinmeister Gary Koppenjan said, "If you've had a salad, you've
had a Seminis product."

It is estimated that Seminis controls 40 percent of the U.S. vegetable seed
market and 20 percent of the world market‹supplying the genetics for 55
percent of the lettuce on U.S. supermarket shelves, 75 percent of the
tomatoes, and 85 percent of the peppers, with strong holdings in beans,
cucumbers, squash, melons, broccoli, cabbage, spinach and peas. The
company's biggest revenue source comes from tomato and peppers seeds,
followed by cucumbers and beans.

In large part, these numbers reflect usage of Seminis varieties within large
industrial production geared towards supermarkets, but Seminis seeds are
also widely used by regional conventional and organic farmers as well as
market and home gardeners. Johnny's, Territorial, Fedco, Nichol's, Rupp,
Osborne, Snow, and Stokes are among the dozens of commercial and garden seed
catalogs that carry the more than 3,500 varieties that comprise Seminis'
offerings. This includes dozens of All-American Selections and an increasing
number of varieties licensed to third parties for certified organic seed

The brand-name companies under Seminis (such as Petoseed) have developed,
released, produced and distributed varieties common to the market farmer and
even home gardener. These include Big Beef, Sweet Baby Girl and Early Girl
Tomatoes; Simpsons Elite and Red Sails Lettuces; Red Knight and King Arthur
Peppers; Gold Rush and Blackjack Zucchinis; Stars & Stripes Melon; and Bush
Delicata and Early Butternut squashes (see sidebar for other popular

Many of the Seminis varieties are derived from their in-house breeding
programs, as well as industry alliances with DuPont, and university
partnerships with the likes of Cornell, Texas A & M and the University of
California. The company's F1 hybrid genetics are considered excellent in
many areas, including overwintering brassicas, disease resistance in
cucurbits, packing qualities in green beans, and flavor in tomatoes.
"Organic farmers love our product," Koppenjan told me, "We have the disease
resistance, and this is more important in organics than conventional, where
farmers have more disease-control options."

The implications of Monsanto ­ often associated with the antithesis of the
organic movement ­ purchasing a company that serves the organic community
are complex. This has certainly been the catalyst for the emails that some
catalog companies are receiving. Both Johnny's and Territorial have received
strikingly similar missives with nearly the same wording, demanding that the
firms reveal their Seminis' varieties "so I can avoid them at all costs.
Otherwise I'll toss your catalog." Seed catalogs may see more of this, as
Monsanto is a large target amongst those concerned with globalization.

While voting with ones dollars can be an effective tool of change, it is
also important to recognize that these are also seed catalogs that have
recognized the needs of smaller organic producers, offering strong lists of
regional varieties and expanding their certified organic selections. None of
these companies was overjoyed with news of the acquisition, and they all
seemed to be in different phases of analyzing its impact. It's not an easy
task. Seminis' varieties account for 11 percent of Fedco Seed's gross sales,
and the numbers are much higher in categories like melons and squash. While
Fedco founder C.R. Lawn expressed his personal inclination to have nothing
to do with Monsanto, the volume of sales demands careful consideration.
Fedco is surveying its staff to decide how to respond, with options ranging
from phasing out all Monsanto-Seminis varieties to putting a "tax" on these
varieties and using this money to fund regional grassroots seed development.

For some growers and seed catalogs, this may seem a non-issue; what matters
to them is the quality of the variety, not the politics of who owns that
variety. And even if one does care and would like to take one's business
elsewhere, there may not be immediate replacements for many of the Seminis
varieties. The economic impact of abandoning a variety that keeps the cash
flowing cannot be easily overlooked. For others, the Monsanto connection may
be a line that can't be crossed. Regardless of one's stance, the acquisition
offers a history worth tracing in the continuing trend of food industry
consolidation, a lesson that should give everyone pause to consider the
future of seeds.

In the early 1990s, billionaire Alfonso Romo, descendent of a Mexican
president, Olympian athlete in horse jumping, bakery and beverage mogul, and
owner of Ciagarrera La Modena ­ Mexico's largest cigarette company ­ set out
to become the global king of vegetable seeds. Romo had watched agrochemical
companies gobble up seed businesses in the larger agronomic crops like corn,
and he noticed that there was little attention being paid to the Œminor
crops' of the vegetable seed industry. By 1994, he had succeeded in building
Seminis, purchasing longstanding seed companies such as Asgrow, Petoseed
(which had recently purchased the Dutch firm Royal Sluis) and dozens of
Asian seed companies. Seminis grew quickly, thrived and went public (trading
as Empresas La Moderna or ELM, the former parent company of his cigarette
firm‹which Romo sold in 1997 for $1.5 billion).

According to seed industry insiders, one of the company's strengths was also
its weakness. Early on, it benefited from internal competition, retaining
the brands such as Petoseed and Asgrow and allowing Seminis breeders to vie
for product development and placement. This may have led to excessive
inventory ­ the company's list swelled to near 6,000 varieties at one point
before cutting a whopping 2,500 varieties in 1998 (and leaving more than a
few farmers looking for new varieties).
In 2003, Seminis was in a financial slump; shares slipped to around 50 cents
each from previous highs of more than $7 a share. Fox Paine and Co. ­ a firm
specializing not in agriculture but in buyouts ­ stepped in to purchase
majority control of the company and stabilized the slide. Financial analysts
and the seed trade were waiting to see the fate of the gene giant in the
hands of this holding firm. With the Monsanto announcement, the wait is
over. The purchase catapulted Monsanto past rival DuPont (Pioneer Seed),
making them the world's largest seed company ­ first in vegetables and
fruits, second in agronomic crops, and the world's third largest
agrochemical company.

This is not the first time Seminis and Monsanto have done business. In 1997,
Monsanto began to insert its Roundup resistant gene into one of Seminis'
lettuces, with an agreement to split the premium fifty-fifty. A 1999 Wall
Street Journal article also noted that Seminis had received U.S. regulatory
approval for selling disease-resistant genetically engineered squash and
tomatoes with longer shelf lives and that the firm was working on using
biotechnology to create sweeter peas and worm-proof cucumbers. In the same
Journal article, Romo envisioned a Seminis future with biotech crops such as
non-browning lettuce, broccoli with enhanced cancer-fighting properties, and
spoil-free produce. "Seeds are software," he was quoted as saying, "and we
have the seeds." Romo will stay on as Chairman and CEO of Seminis under
Monsanto, according to the company's press release announcing the deal.

Conjecture and Concern

While news of Monsanto's acquisition of Seminis was less than a blip on the
general public's radar, small groups of farmers, activists and seed trade
professionals immediately began to connect to discuss the ramifications on a
variety of list serves and web sites over the Internet. The professionals I
spoke with for this article ­ Mark Hutton (former plant breeder for Peto now
at University of Maine Extension), C.R. Lawn, Rob Johnston (founder, owner
and plant breeder of Johnny's Selected Seed), Frank Morton (Plant breeder
and owner, Wild Garden Seed), and Michael Sligh (Policy Director, RAFI) ­
were in concurrence with the concerns expressed in the online group
discussions, first, with regard to the potential decrease in varietal
selection for farmers, and second, in the potential acceleration of biotech
applications in the vegetable sector.

One can only speculate on Monsanto's motives for purchasing Seminis. We can
make educated projections, just as Wall Street financiers have done on news
of the acquisition. Financial and agricultural professionals interviewed in
the mainstream press, such as Don Basse of the commodity advisory group
Agresources, have surmised that the acquisition can be profitable for
Monsanto only with the application of biotechnology ­ as Seminis
conventional seed business was nearly half a million dollars in debt and
continuing to lose money.

Basse says that it would be logical for Monsanto to use biotech to increase
the nutritional value of fruit and vegetables as opposed to focusing on
shelf life or devising pest-resistant strains. Monsanto's press release
noted that "Biotechnology applications could be an option, and will be
evaluated in the context of Monsanto's research-and-development priorities
and potential commercial business opportunities." However the main tone of
the announcement focused on the trend of nutrition and healthy lifestyles.
Monsanto's CEO put it this way, "The addition of Seminis will be an
excellent fit for our company as global production of vegetables and fruits,
and the trend toward healthier diets, has been growing steadily over the
past several years."

"You have to ask yourself why they (Monsanto) would decide to buy this seed
company," was the thought first shared by Rob Johnston of Johnny's Selected
Seeds, "Their Roundup herbicide patent is expiring, so their future profits
are in the biotech traitsŠI think they're going to push and see if consumers
will accept it." C.R. Lawn of Fedco was less certain, feeling that Monsanto
would not be bold enough to try and sell such technology to consumers and
farmers, particularly after GMO wheat was recently shelved because of the
lack of perceived public acceptance. There is also speculation that if
Monsanto can slowly start building the GMO vegetable-fruit market, then the
debate over GMOs will become a moot point, as they will have made their way
onto the plate and thus gained acceptance (or at least acquiescence).

Even if one does not believe that GMO vegetables will be in the Wendy's
salad bar in short order, there is more pressing concern that Seminis will
drop many of the hybrid and open-pollinated varieties that regional farmers
currently depend upon. Prior to the buyout, the company's main product focus
had continued to move towards supplying genetic for the larger centers of
production. "It's not like they're still breeding tomatoes for the
Northeast" Rob Johnston noted. Still, Johnston conceded that it would be
difficult for Johnny's to replace some of the Seminis varieties that their
customers turn to year after year, such as Gold Rush Zucchini or King Arthur
Pepper. Yet he feels certain that cuts are coming. Johnston was disappointed
with the news, in part he said because he likes not only the quality of
product but the Seminis breeders themselves, "I worry about the future of
their breeding programs, that they (Monsanto) will curtail creative
directions and focus them on a Monsanto agenda."

Organic Seed Alliance has received over a dozen emails and phone calls from
concerned farmers. Minnesota farmer Jim Fruth contacted us for assistance in
"dehybridizing" a Seminis hybrid pepper that has recently been dropped. Like
many farmers, Fruth has integrated particular varieties into his production
and marketing plans and he says he is now without a variety that is "a vital
part of my livelihood." Nash Huber of Sequim, Washington, said that, after
vast trialing, he had found that Seminis cabbage varieties have excellent
post-harvest holding capacity, extending his marketing season and farm
profitability. He did not have high hopes of finding replacements.

Mark Hutton worked as a squash and eggplant breeder for Petoseed before it
was purchased by Seminis. From his perspective, farmers like Fruth and Huber
should start trialing new varieties soon. "Monsanto is going to look at this
from a bean-counter perspective. Low margin varieties get dropped, and this
means anything that's not for large commercial production."

One seed catalog owner I spoke with believes that farmers should not react
to the news by seeking non-Monsanto/Seminis seed sources. He said there is
no indication Monsanto will drop these varieties and that rushing to find
replacements isn't an answer. "Where are you going to go? Some of these
varieties are irreplaceable. Are we really going to drop or boycott some of
the best material out there because we don't like Monsanto?" He warned that
doing so might only accelerate the downsizing of the Monsanto product list,
leaving farmers in a real lurch. "The process of breeding alternatives to
these (varieties) is a long, longterm project. And what are you going to
plant in the meantime?"
Most of the people I spoke with agreed that there are few options; this is
what is making them react to the news so passionately. In a healthy
competitive market, a producer has more than one cog to choose from, giving
the producer freedom to switch suppliers if they have an issue with their
traditional supply chain. In a highly consolidated system, this choice is
not easily apparent and may simply not exist.

Consolidations in the seed world are nothing new. The impact is predictable:
A few breeders lose their jobs, farmers scramble to find another variety to
fit their production system but something eventually comes along,
stockholders either make or lose money, and, in the end, food still winds up
on the plate of most American households at 7a.m., noon and 6 p.m. We've
been here before in recent times, and we've seen even bigger control of seed
ownership and distribution (although not in any of our lifetimes).

A-century-and-a-half ago there was only one mega-distributor of seeds in
this country. Lobbying and activism brought about its demise. That
distributor was the United States government, and the rabble rousers who
broke that monopoly were none other than the American Seed Trade Association
­ whose largest modern financial benefactor is none other than Monsanto.

A Brief History of the Development of the Seed Industry ­
The Shift from Public to Private Seed Systems

One hundred fifty years ago the United States did not have a commercial seed
industry; today we have the world's largest.* Some view this as real
progress, a form of genetic Manifest Destiny. A nation once a Œdebtor' in
plant genetics now supplies the world. In 1854, seeds were sourced in the
U.S. by way of a small number of horticultural seed catalogs, farmer (or
gardener) exchange, on-farm seed saving, and through the beneficence of the
United States government. Specifically, beginning in the 1850s, the U.S.
Patent and Trade Office (PTO) and congressional representatives saw to the
collection, propagation and distribution of varieties to their constituents
throughout the states and territories. The program grew quickly so that, by
1861, the PTO had annual distribution of more than 2.4 million packages of
seed (containing five packets of different varieties). The flow of seed
reached its highest volume in 1897 (under USDA management) ­ with more than
1.1 billion packets of seed distributed.

The government's objectives in funding such a massive movement of seed
stemmed from the recognition that feeding an expanding continent would
require a diversification of foods. To the early colonies, the introduction
of wheat, rye, oats, peas, cabbage and many other vegetable crops was as
critical to food security as was the adoption of the corn, beans and squash.
Immigrants were encourage to bring seed from the old country, founding
fathers such as Thomas Jefferson engaged in seed-exchange societies, and by
1819 the U.S. Treasury Department issued a directive to its overseas
consultants and Navy officers to systematically collect plant materials.

The first commercial seed crop was not produced until 1866‹cabbage seed
produced on Long Island for the U.S. wholesale market. The industry
flourished to some degree, but early seed trade professionals felt their
growth was stymied by the U.S. government programs as well as the
self-replicating nature of their product (that is, the factory contained
within that product). In 1883, the American Seed Trade Association (ASTA)
formed and immediately lobbied for the cessation of the government programs.
The organization developed powerful allies, such as Grover Cleveland's
Secretary of Agriculture, J. Sterling Morton, who wrote that the government
giveaway was "antagonistic to seed as a commodity-form and in direct
competition with the private seed trade." But the program was very popular
with constituents, and the USDA's seed budget was kept intact ­ at one point
counting for a full 10 percent of the agency's overall annual expenditures.

In the early part of the 20th century, the first wave of hybrids began to
provide seed companies with a potential increase in product profitability
(as farmers would now need to return to the seed distributor for materials
each year). However, most of the hybrid development was occurring at Land
Grant Universities, and these universities refused to give the companies
exclusive rights to the seed. Once again, the industry felt its growth
hindered by federal programs and complained of unfair trade practices.
Mounting data also indicated a slowing in yield increases from seed
developed in government programs. The industry used this last point to
strengthen its argument for the privatization of seed development in order
to foster greater food security.

In 1924, after more than 40 years of lobbying, ASTA succeeded in convincing
Congress to cut the USDA seed distribution programs. The USDA still
supported breeding at the state agricultural schools, and for a time these
programs continued to compete with seed companies by developing Œfinished'
commercial varieties. Associations such as the American Society of Agronomy
and American Society of Horticulture Science eventually convinced the public
programs that their appropriate role was in training plant breeders,
performing fundamental research, and creating raw materials and technologies
for private industry to capitalize on. The LGUs began to increasingly serve
in this capacity, developing inbred parental lines and breeding stock that
the seed trade would use to create proprietary varieties.

These changes in the public role, along with improvements in hybrid
techniques, led to the growth of the seed trade following World War II. The
trade was well represented during this period by regional companies. The
conversion to monocropping and large-scale corporate agriculture had not yet
moved into full swing. The Santa Clara Valley grew vegetables and fruit and
not internet startups, and Americans still planted their Victory Gardens.
The seed trade reflected this diversity in food production.

In the 1960s, a few larger seed firms began to purchase smaller companies
(mostly to acquire strong hybrid holdings). But the consolidations of this
period were minor compared to the frenzy that would come with a Supreme
Court ruling on June 16, 1980, in the case of Diamond v. Chakrabarty. Prior
to the Chakrabarty decision, a plant (or animal) could be owned, but the
genetics could not. This case cleared the patenting of life forms on the
bases of their genetic coding. The PTO granted more than 1,800 such patents
following the ruling. Companies that had no historical seed
interests‹primarily chemical and pharmaceutical firms‹began purchasing seed
companies. In a few short years, there were billions of dollars in mergers
and acquisitions‹with little to no regulatory oversight‹creating for the
first time a majority ownership of plant genetics by a few multinational
companies. No other natural resource (marine, timber, minerals) has ever
shifted from public to private hands with such rapidity, such intensity of
concentration, and so little oversight.

The Immediate and the Future

"There is a direct threat to our food system when we have a preponderance of
genetic resources controlled by institutions whose only goal is profit,"
plant breeder Frank Morton expressed emphatically when asked for his
perspective on the Monsanto acquisition. He went on to compare the present
with the past, "When these services [breeding and production] were diffused
amongst many individuals and groups with diverse motives, we had a much more
diverse and healthy food system."

Diversity and competition have historically made for healthier economies as
well as ecologies. Ecological and economic systems have another thing in
common; as one group abandons a niche, it leaves room for others to move in
and utilize it. Many of the seed company representatives and breeders I
spoke with felt that the organic community can and should develop a less
centralized seed system. Steve Peters, seed procurement manager for Seeds of
Change, shared his firm's vision: "Part of our strategy is to go into
neglected markets and respond to these needs. We want to offer true organic
alternatives; this means we not only pay attention to the regional needs but
also have a different approach to breeding ­ building new alliances in crop
development. We're not chasing single-gene resistance but looking at
horizontal resistance in traits like Downy mildew in spinach."

Adaptability has historically been an integral part of the organic movement­
responding to customer inquiry and opinion, personal service (a face on the
food), localized and decentralized ­ all traits that help make the organic
sector healthy and promote its vigorous growth. "The organic seed world is
where the organic produce market was twenty years ago," said veteran organic
grower and seed producer Nash Huber. "Produce quality wasn't always so great
then, but we worked it out and now are better than the conventional systems.
The potential in seed is that the customers ­ we farmers ­ will see that, in
the long run, an organic seed trade will serve us." Farmers like Huber are
investing in the organic seed trade. He works as an educator in the Organic
Seed Alliance's WSARE organic seed production trainings, is leading a
participatory plant breeding project with the Alliance, and produces seed
for the organic seed trade as well as his own on-farm use. Carrots are the
main cash crop on Huber's 400-acre farm, and he produces 80 percent of his
own seed to insure quality and availability. "I can't afford to have a
company drop my source," he explained.

Seed companies and farmers are not alone in their rising to meet the need
for changes in the seed world. In 2003, more than 70 university breeders,
representatives from farmer-based NGOs, and policy specialists met at the
"Summit for Seeds and Breeds for the 21st Century" in Washington, D.C. The
breeders who represented a diverse set of crops, from schools that have
traditionally served clients of large-scale Green Revolution style
agriculture, called on each other to "reinvigorate public breeding" to meet
the needs of organic and sustainable agriculture. The group will host a
full-blown conference in Ames, Iowa, in September 2005.

While the seed consolidation trend seems to have reached a particularly dark
moment in the Monsanto-Seminis acquisition, it may also serve to fuel a
momentum in the developing organic seed community. The issues are immediate
and fraught with complexity; the answers are long-term and require
commitment. Said C.R. Lawn of Fedco, "We need to keep working on creating a
farmer breeding community. But this is long, slow work. You find and replace
varieties one by one. You work slowly in the direction you want to go. Seed
work is slow work."

- Matthew Dillon