AGRICULTURAL COMPETITION

ASA Position

ASA supports competition in all sectors of U.S. agriculture in order to enhance efficiency and reduce costs to soybean producers.  At the request of the Department of Justice and USDA, ASA submitted comments in December 2009 expressing specific interest in competition in the seed, rail, and fertilizer industries.

Regarding seed industry competition, ASA supports enabling trait providers and seed companies to access and use the data packages of a patented biotech trait for the purpose of preparing to register and commercialize generic versions of the trait after patent expiration.  In the absence of statutes or regulations that provide a process for generic registration, ASA supports efforts by the private sector or, if necessary, the federal government that facilitate this process.   

ASA is also concerned by the potential negative impact on soybean and soybean product exports in the event that foreign registrations of biotech traits are not maintained in countries that require them.  It is critically important that a process be established to maintain foreign registrations as long as traces of a trait are identified in export shipments.  ASA also strongly supports efforts to establish a commercially viable and internationally accepted tolerance for the presence of deregistered traits in shipments and products in order to maintain the competitiveness of U.S. soy exports in world markets. 

Background

The Department of Justice (DOJ) and the Department of Agriculture (USDA) are examining agricultural competition issues and have announced a series of workshops on these issues to be held in 2010.

On December 30, 2009, the American Soybean Association submitted comments to the Department of Justice on competition issues in the agriculture industry.  Our comments included four principles that we believe should guide agricultural competition:

1.      Competition within and among domestic industries must be safeguarded.

2.      We support innovation, including protecting patent rights.

3.      Following patent expiration, growers should see a reduction in prices through generic competition.

4.      Foreign competitors should be subject to the same requirements and costs for accessing intellectual property as apply in the United States.

Competition in the Seed Industry

With regard to promoting and safeguarding competition in the seed industry, ASA expressed three concerns:

1.       The terms of licensing agreements with seed companies and trait providers related to the availability and usage of traits and germplasm should not in any way thwart competition.

2.      Issues related to competition are arising with the approaching expiration of the first patents for agriculture biotechnology traits. The first patent to expire will be for Roundup Ready soybeans (RR1) in 2014, and patents on other soybean biotech traits will be expiring thereafter. No statutory or regulatory process is in place to ensure and facilitate the continued registration of ag biotech traits in key export markets after patent expiration. Farmers understand that such a process is essential in maintaining market access, promotion and competition.

3.      There are multiple implications of patent expiration for international trade, including uncertainly about the process to maintain registrations in foreign markets. Soybean producers have learned that once an ag biotech trait is commercialized, it will be detectable for many years after registration is discontinued. The absence of commercially viable tolerances for the adventitious presence of ag biotech traits in both the U.S. and foreign markets makes the a particularly important concern.

Implicit in these principles and concerns is the need for seed companies to be able to access and use the data packages for patented ag biotech traits of other companies in advance of patent expiration for the purpose of obtaining necessary registrations.  It can take as long as five years to register traits, or stacks of previously registered traits, in the European Union, which is a key market for U.S. soybean exports.  Requiring companies to wait until patent expiration to access and use data packages for registering traits or stacked traits would either jeopardize our export markets or delay commercialization until registrations are received.  The latter consequence would deny U.S. soybean producers access to generic traits after their patents expire.  It could also exacerbate the problem of how to maintain international registrations on traits after their patents expire.

The need to allow competitors to access and use data packages in order to prepare to register products prior to patent expiration was recognized and addressed by Congress in the Hatch-Waxman Act, in the case of pharmaceuticals, and by the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA), in the case of pesticides.  Under FIFRA, a competitor may submit an offer to buy the data package for the patented product of another company.  If the two parties are unable to reach agreement on data compensation, FIFRA provides for binding arbitration.

Due to the recent introduction of ag biotech traits in 1996, there is no statute in place to provide a similar process for generic registration.  Facing the pending expiration of patents for an increasing number of ag biotech traits in coming years, ASA believes that urgent action is needed to provide a pathway forward or else generic competition will not be realized or will be greatly delayed.

Competition in the Rail and Fertilizer Industries
Soybean farmers have watched with concern as industries that support production and distribution have consolidated.  Two such industries are the rail industry and the fertilizer industry.

Major railroads have shrunk to seven Class 1 railroads, with only four controlling 93% of the market.  Soybean producer concerns about high surface transportation costs, particularly in the rail industry, led to the creation of the Soy Transportation Coalition (STC) in 2006.  A recent study by the STC noted the volumes of soybeans and soy products that are moved at potentially excessive rates.  Much of this increased cost is passed on to farmers.

Additionally, consolidation in the fertilizer industry at manufacturing and distribution has led to fewer choices for farmers and challenges in securing fertilizer at competitive rates.