AGRIBUSINESS: GMOs, PATENTS INFRINGEMENT, CUTTING-EDGE TECH, LOBBYING … ET AL
To many people the word “farming” not only means the produce they consume, but it also conjures up huge inflows of dollars on which, for example, Argentina leans. No doubt, the 2008 farm crisis, when Kirchnerism decided to sharply raise taxes on soybeans and sunflower - leading to farmers’ nationwide protests, strikes, and road blocks -, helped move the countryside from the back burner to the forefront of people’s minds.
I spoke, on a scorching summer afternoon, with Raul Perez San Martin, Professor in the Master’s Program of Agribusiness, at the University of Buenos Aires, who met me at his company for a conversation in which he gave a bird’s-eye view of the industry and walked me through some of the most attention-grabbing issues today.
RAUL PEREZ SAN MARTIN
Agricultural Engineer graduated from the University of Buenos Aires
Master’s in Agribusiness at Escuela de Graduados Alberto Soriano
Full Professor in the Master’s Program of Agribusiness at University of Buenos Aires
President of Yayabu
Is agriculture Argentina’s main industry?
The agricultural industry with all its chain is Argentina’s main industry, without a shadow of a doubt, in addition to the production of commodities, understanding by commodity the grain proper, corn, barley, wheat, sunflower, those are the most important. It’s everything you sell and buy for a price regardless of quality. For example, Argentina sells wheat just as a commodity because we don’t split by quality. Of course the higher the quality, the higher the price. The agro-industry exports account for 56%-58% of Argentina’s whole exports.
With all the price differences in the last few years and the changes in economic policies, which is the star among all grains today? Is still soybeans?
Soybeans for plenty of reasons and today they are followed very closely by corn. The Kirchner administration during the wasted decade (TN: this is a play on words of the interviewee’s. Kirchnerism used to call the decade in which they were in power the “hard-won decade” ) was after the taxes on soybeans and intensely promoted their production because it was the most taxed crop. Then came wheat, corn, and barley, but the gap between them and soybeans was striking. Now that situation is turning around. For instance corn moved from 22 M tons during the former administration to close to 42 M tons in 2019, that is, twice as much in just a couple years. Soybeans are always around 50 M tons, except last year because of the drought.
How has land ownership changed over time?
That’s an interesting point because in people’s psyche the land is still in the hands of a few families sporting patrician names, when in fact that is not the case anymore. Those families have either lost their lands or remained with very little. During Kirchnerism, due to the price of certain grains, especially soybeans, pools emerged to an unprecedented degree. Now that soybeans are at half the price, they waned and are much smaller. In fact, landowners usually don’t cultivate, but lease the land for 1, 2, or 3 years at most.
“There are 7 billion of us on the planet, how are we going to feed all these people without GMOs? No one has still come up with a satisfactory answer”
Has Argentina reached its full potential in production terms?
No way, we are still increasing production because of new seeds, new fertilizers, new herbicides, new pesticides, whatever. Technology-wise we are always in an ongoing revolution. Oliver Williamson, the Nobel Laureate, called the changes in technology a “permanent revolution”. And you can see it in our production. Last year was an exception because we faced the worst drought in 60 years. During the wasted decade production was close to 90 M tons, this year - weather permitting - it is going to be close to 1.34 M, the increase was 30% or more in 4 years. Huge difference. Of course even when agricultural production depends on the weather, technology is an undeniable ally, it increases yields drastically.
“We use sophisticated technology in the development of crops such as sensors to see what mineral or vitamin they lack, or satellite images showing flaws to correct. ”
Right now, we are able to feed 400 M people, that is, some 10 times Argentina’s population, and no one speaks about the limits because limits are unknown.
“Patent infringement is a problem because breeders will channel the most research into those crops they get the most money from, that is, the ones that cannot be saved”
Farming is the industry that most of us associate with great tech leaps. What are its greatest technological changes that come to your mind?
Technology is a broad concept that people tend to sweepingly associate with machinery, but it’s somewhat reductionist. Let’s not forget that a lot of technology goes into fertilizers or herbicides production, for instance, along with new seeds and innovative genetics studies which, put together, increase production. Machinery-wise, farmers have nowadays bleeding-edge machines, we are on a par with the first world. We are also in a huge process of change in the whole chain - logistics, ports, factories. It’s multifactorial indeed. Just by way of example, our soybeans industry is, I am dead sure, the most efficient in the world.
In some parts of the world there are innovative techniques such as vertical farming...
“Right now, we are able to feed 400 M people, that is, some 10 times Argentina’s population, and no one speaks about the limits because limits are unknown. ”
Yes, it all depends on the geographical challenges each country faces. For example Israel was the creator of the phenomenal drip irrigation process due to the hostile landscape it has for cultivation. We have land in abundance so we do not have so many obstacles to overcome. Those countries with not so much arable land may resort to vertical farming. Innovation is an ongoing process, a continnual revolution. We use some other very sophisticated technology in the development of crops, sensors to see what mineral or vitamin they lack, or satellite images showing flaws in the crops that must be done away with.
You said that we are just about on a par with the rest of the world. What is missing to be on an equal footing with the globe’s big players?
There’s a huge controversy with patents and property rights. The very big problem here is seed-saving (NT: What in Spanish is called “Bolsa Blanca”, those seeds created from seeds bought for the previous season) which accounts for close to 50% of the soybeans seeds sown in our country.
Seeds are a controversial issue enveloped in price and infringement conflict, even when they surely demand lots of time and tons of money to be created. How expensive is the process and how long might it take?
You suppose right. Creating the right seeds implies a very long process - minimum 5 years - and millions and millions and millions of dollars. Every seed has lots of R&D, plenty of trial and error processes, and in only 1 out of 200 events do you come up with the right one and that is transferred to the price.
Among the most important players in this match are the breeders, Monsanto, Nidera, Don Mario, and so forth. On the other side, the farmers with their unions, SRA, CRA, Coninagro and FAA, with a different stance, and also the government has another viewpoint. We have to solve this problem as soon as possible in order to move forward with new soybeans events. With corn, seed-saving is impossible because you produce hybrids so you inevitably need the breeders to produce them. That’s the reason why, in my opinion, corn production is increasing fast. But, for instance, wheat, soybeans, and barley seeds are easy to copy. One year you buy seeds and the following year you replicate them and use them without paying fees to the breeders. Therefore, as a company, where are you going to channel the most research and the most efforts? Into seeds you get the most money from.
So the question that naturally ensues is: Are they unaffordable? Are farmers held hostage in a raw deal?
They are undeniably expensive, but again, they are expensive due to the sophisticated R&D they involve. Now there is a seed law being discussed at Congress, and very likely to be passed this year, which seeks to set a 5-year timeframe of payments, after which any payment obligation expires. Now they must be paid every year. I really hope this law is passed. However, let´s not forget that 2019 is an election year.
Let’s talk a bit about an engrossing and controversial issue: Genetically Modified seeds or GMOs. GMOs give rise to - seemingly - visceral debates, for and against. Some criticize their unfettered use. What’s your opinion?
Well, I teach at the University of Buenos Aires, which I am very proud of, and students are from a wide cross-section of society, very heterogenous and with a whole spectrum of ideas. We’re never short of debates and one of the hottest is precisely GMOs. You have those pro-GMOs and those anti-biotech. But, anyway, it always comes down to a simple question: There are some 7 billion of us on the planet, with 1 billion people below the poverty line, already malnourished, how are we going to feed all this population without resorting to GMOs? No one has still come up with a straight, satisfactory answer.
They are said to be the cause of, among other things, cancer. Are these fully ungrounded arguments, taken out of thin air?
It’s always wise to be open to and analyze every situation, every study, every paper, but so far there have been no cases that might pose any concern. We should also take into account that GMOs are used in some links of food production, people do not consume them directly. We have to base ourselves on facts.
“The gap between what the producer receives and what people end up paying at the checkout is not a myth. It is striking. Something fails ”
Going back to production, which are our main agricultural competitors?
“That the agricultural sector is only technology is a misconception rather widespread today. Around 35% of the EAP is related to the agro-industry”
In soybeans our main competitors are the States and Brazil. There are three big players in soybeans in the world and we are one of them. In corn, the States produces a lot, I am drawing a blank on its figure right now, but perhaps ten times as much as Argentina does. In this crop, the other competitor is Brazil, but in sunflower we face no competition.
Once a renowned doctor, whose name I will ethically withhold, told me off the record that pharmaceutical lobbying is the most powerful in the world, one that might well drive any democratic government against the ropes. What about farmers’ lobbying, how powerful might it come to be?
Of course, there is lobbying, as in any other industry, for taxes, priorities, export duties and so on and so forth, but it is not nearly as powerful as in other industries like, for example, the pharmaceutical one, when in fact farmers do represent a very powerful industry indeed.
One of the criticisms the agricultural industry is target of is that it is not labor intensive. Employment is one of the big concerns in every economy and this industry does not demand much labor thanks to all the prevailing technology nowadays.
“Regarding breeders, we are approaching dangerous concentrations”
Let me disagree with you. The agricultural industry gives rise to a lot of work and at times, perhaps, without much visibility. Many jobs depend on the farming industry. It also puts other industries in motion, for example through the purchase of machinery, which helps create jobs. There is an excellent paper by Juan Llach written some 10 years ago in which he proves with remarkable dexterity what a significant source of employment farming is. Close to 35% of our economically active population (EAP), the people who work, are somehow related to the agricultural activity.
That the agricultural sector is only technology is a misconception rather unfairly widespread today.
“People find it hard to regard foodstuff as a commodity quoting on commodity exchanges or having bidders, but the market sets the price of food”
Talking of added value, one subject that comes up periodically is that Argentina sells primary products, but it does not go to great lengths to add value. Why is this so?
That is somewhat true, to a certain extent. Argentina sells, among other things, soybean oil, and soybean flour for example, as well as biodiesel, that is, it does add value whenever it can. Is it enough? no, it isn’t. But It is also true that importing countries want to add their own value and you cannot do much against that. You can export to, say, China, but they themselves want to add the value. Anyway, as I said before, added value is also found in the whole process before materializing such a product as a hybrid, but I agree, after that, there is not much added value.
In Nestor Kirchner’s presidency, he reached an agreement with stockbreeders on which beef cuts to be sold in Argentina and which ones to be sold abroad at, clearly, a much higher price in hard currencies. Does that differentiation happen with grains and fruits?
You know, it’s kind of common to hear people say that they have seen Argentine products in, say Chile, at a lower price and of much higher quality. Frankly, to me that is folklore. In Argentina we have access to very good quality produce and very few, perhaps certain types of fruit, are export products. All in all, the quality of the products we have at our disposal is excellent.
What about monopolies or quasi monopolies? What is the landscape like in that sense?
We are going to a dangerous space. Concentration is taking shape dangerously and China is the main driving force in this concentration process. China is a revolution in the world. In Argentina China bought Nidera - a very big company - bought some ports, the factories at those ports, but what they are aiming at is the commodity.
What happened with the acquisition of Monsanto by Bayer? Europe did not seem willing to make the process all that easy.
I don’t know the details of the case, but I suppose that Bayer had to divest some business in the States. Now, it’s entirely only one company, Bayer.
Another ubiquitous complaint is price fluctuations. Perhaps it has always been the case, but now the fact of price changes due to climate effects or some such factors elusive to us, uninitiated outsiders, hit people’s pockets and they do not fully grasp the reasons. What do fluctuations depend so much on?
In a nutshell? The market. It’s that simple. People find it hard to regard foodstuff as a commodity quoting on commodity exchanges or having bidders, but this is so as in the case of many other commodities. Grains on the Chicago Exchange go through the same fate as other commodities on any other stock exchange on the planet. There may also be other external factors such as a sharp devaluation, a serious drought caused by climate changes, institutional policies affecting the agro-industry. But it is ultimately a matter of supply and demand. Again, the market.
One point the Media regularly puts forward is the enormous gap between the price the farmer is supposedly paid and what consumers pay at supermarkets’ checkouts. Is this really so? What makes the product so expensive from point to point?
Definitely. Producers are not paid on the basis of the price people wind up paying when buying from the local greengrocers or supermarkets. There are lots of costs in the process - taxes, transportation, which inflate the price exponentially. The gap is not a myth, it does exist .... and something is going wrong in the process.
Jorge Reparaz
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