- Should seed and pesticide companies break into separate entities?
- Should chemical companies spin-off their ag-tech businesses?
- Should outside influences drive business strategies?
There has been a lot of unlove with chemicals over the last 30 years. In the 1990s, I experienced the first wave of companies liberating their more innovative pharmaceutical and biotech divisions from the dirty chemical businesses. Calling cards soon became collector items as companies reorganized at a dizzying pace. A decade later, specialty chemicals were spun off from commodity businesses as the rush to cleantech and green chemistry became the PR consultants’ new buzzwords. Now, after a decade of consolidation in the crop protection industries, are we seeing the next wave of break ups with the innovative seed industries liberating themselves from the litigation-laden pesticide businesses?
The rationale I hear from the insiders seems quite convincing. Companies involved in both the seed and pesticide sectors see a pipeline of pesticide-related class action lawsuits, MDLs and unlimited foundation-funded activist campaign onslaughts threatening their entire business. Bringing new pesticides onto the market has become increasingly difficult while the regulatory world is warming to the more innovative, highly beneficial gene-editing solutions. And finally, from a PR perspective, selling seeds is much better received than selling chemicals that enter the food chain. The future is in advancing seed technologies and breeding solutions.
But I’m not convinced.
Ten years ago, the logic was that the two sectors were complementary, and the merger of, for example, Dow and Dupont’s agricultural sciences businesses, achieved a synergy and scale that delivered a better service to farmers, researchers and society. Today spinoffs are back in fashion with companies like GE, J&J and Kellogg’s making balance-sheet decisions to please shareholders. But would such actions in the ag-tech sector please the value chain?
If we were to wake up tomorrow to find all agricultural technology companies separated into two independent entities, one selling seeds and the other selling pesticides, what would happen?
- With smaller companies becoming smaller scaled (until the next wave of consolidation), farmers will find themselves with less access to specialized agronomists, industry sales reps and technical support. There will be less interdisciplinary expertise to support the agricultural sector at a time when the challenges are mounting given climate issues, soil degradation and market difficulties. At a time when farmers need more trusted allies and support, this strategy seems counter-intuitive.
- The research community thrives on cross-fertilization. My former company used to put chemists and biologists in the same offices or on the same projects in the research centre to enhance innovation and idea cultivation. Innovations like seed treatments, herbicide-tolerant seeds or no-till farming with complex cover crops would be less likely today if researchers were left to iterate in their silos.
- In the public policy arena, global trade associations are already struggling to find a voice in policy debates. In many cases, the seed sector has been under-represented (remember the unceremonious exit of green biotech from Europabio or BIO?). Innovative seed breeding technologies have been facing unrelenting regulatory pressure since GMOs entered the risk issue debate. Attacks on relatively benign herbicides like glyphosate were proxy battles fought to delegitimize herbicide-tolerant GMOs. The best regulatory defence for ag-tech is to show the benefits of synergies (to farmers, to the environment and to consumers).
Why is this happening then?
There isn’t a strong rationale to separate such integrated sectors, so fear must be driving the reasoning.
Social media has been talking about this being the crop protection industry’s Big Tobacco moment. Faced with unlimited lawsuits threatening their existence, the main tobacco companies relented and submitted to regulators’ demands in the Tobacco Master Settlement Agreement. Certain large ag-tech companies fear having their entire businesses sued out of existence so by spinning off their seed businesses, they believe they stand a chance of surviving.
This is not just happening to the ag-tech sector. I have written volumes on how the La Jolla tobacconization strategy has been extended to attacking fossil fuels, food and drink, alcohol, plastics, chemicals and even the pharmaceutical industries. The World Health Organization is taking the lead with their commercial determinants of health strategy to denormalize all so-called health harming industries.
Wouldn’t it make more sense for these industries to come together and unite to fix the broken system controlled by a litigation industry that is driving the narrative with an army of NGOs, foundations and journalists? Entire value chains are suffering and paying the costs as voracious “Predatort” lawyers enrich themselves. This column has argued before that there needs to be a integrated food chain working together on behalf of everyone: from farmers and researchers to retailers and consumers.
This coordinated approach would make much more sense than executives slicing off valuable chunks of their companies out of fear of the litigation industry wolves approaching the herd.
Perhaps a herd of sheep is not the best image to portray such industry strategies. But until our business community (and by that, I mean all businesses) learns to stand up and fight together against the circling wolves, then their companies, their influence and their opportunities will continue to shrink. Entire value chains will suffer from such fear-based business strategies.
David Zaruk is a professor based in Brussels writing on environmental-health risk policy within the EU Bubble.
