Biotechnology: Information on Prices of Genetically Modified Seeds in the
United States and Argentina (Letter Report, 01/21/2000,
GAO/RCED/NSIAD-00-55).

Biotechnology is changing the face of agriculture, with farmers adopting
genetically modified seeds at unprecedented rates. The global area
planted with these seeds increased more than fifteenfold between 1996
and 1998. The genetically modified seeds that are the most widely grown
are herbicide--tolerant soybeans and insect-resistant
corn--specifically, Roundup Ready soybeans and Bacillus thuringiensis
(Bt) corn. Farmers in the United States and Argentina have been at the
forefront of adopting this new seed technology. Although genetically
modified seeds can be a powerful weapon in a farmer's arsenal of weed
control and insect protection tools, these seeds have typically sold for
a premium over conventional varieties. U.S. farmers have raised concerns
about the pricing of genetically modified seeds. This report provides
information on the (1) prices of Roundup Ready soybean seeds and Bt corn
seeds in the United States and Argentina and (2) major reasons for any
price differences between the two countries for these seeds.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  RCED/NSIAD-00-55
     TITLE:  Biotechnology: Information on Prices of Genetically
	     Modified Seeds in the United States and Argentina
      DATE:  01/21/2000
   SUBJECT:  Patent law
	     Patents
	     Agricultural production
	     Grain and grain products
	     Comparative analysis
	     Agricultural industry
	     Prices and pricing
	     Foreign governments
	     Genetics
IDENTIFIER:  Argentina

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GAO/RCED/NSIAD-00-55

r400055 GAO United States General Accounting Office Report to the
Chairman, Subcommittee on Risk Management, Research, and Specialty
Crops, Committee on Agriculture, House of Representatives January
2000 BIOTECHNOLOGY Information on Prices of Genetically Modified
Seeds in the United States and Argentina GAO/ RCED/ NSIAD- 00- 55
Page 1 GAO/ RCED/ NSIAD- 00- 55 Prices of Genetically Modified
Seeds Contents Letter 3 Appendixes Appendix I: Scope and
Methodology 22 Appendix II: GAO Contacts and Staff Acknowledgments
25 Tables Table 1: Price Ranges for Roundup Ready Soybean and Bt
Corn Seeds in the United States (Illinois and Iowa) and Argentina,
1998 4 Table 2: Soybean Seed Price Ranges, 1998 10 Table 3: Corn
Seed Price Ranges, 1998 11 Table 4: Sources of Soybean Seeds 15
Figures Figure 1: Estimated Percentage of Soybean Acreage Planted
in Roundup Ready Soybeans in the United States and Argentina, 1996
Through 1999 8 Figure 2: Estimated Percentage of Corn Acreage
Planted in Bt Corn in the United States and Argentina, 1996
Through 1999 9 Figure 3: Average Prices of Soybean Seeds in
Argentina, 1997 Through 1999, per 50 lb. bag 17 Figure 4: Average
Prices of Soybean Seeds in the United States, 1997 Through 1999,
per 50 lb. bag 18 Page 2 GAO/ RCED/ NSIAD- 00- 55 Prices of
Genetically Modified Seeds Page 3 GAO/ RCED/ NSIAD- 00- 55 Prices
of Genetically Modified Seeds United States General Accounting
Office Washington, D. C. 20548 Resources, Community, and Economic
Development Division B-284201 Lett er January 21, 2000 The
Honorable Thomas W. Ewing Chairman, Subcommittee on Risk
Management, Research, and Specialty Crops Committee on Agriculture
House of Representatives Dear Mr. Chairman: Biotechnology is
changing the face of agriculture, with farmers adopting
genetically modified seeds at unprecedented rates. From 1996
through 1998, the global area planted with these seeds increased
more than fifteenfold. While genetically modified seeds are
available for many crops, the ones most widely grown are
herbicide- tolerant soybean and insectresistant corn seeds
specifically, Roundup Ready soybeans 1 and Bacillus thuringiensis
(Bt) corn. Roundup Ready soybeans contain a gene that enables
soybeans to withstand applications of Roundup an herbicide
effective on many kinds of weeds. Bt corn is genetically modified
with a gene from a soil bacterium that makes the corn resistant to
certain insects, including the European corn borer a damaging
insect pest of corn in the United States. Farmers in the United
States and Argentina two countries that are major producers of
soybeans and corn have been in the forefront of adopting this new
seed technology. In 1999, an estimated 80 percent of the soybean
acreage in Argentina and 51 percent of the soybean acreage in the
United States were planted with Roundup Ready soybeans. However,
while genetically modified seeds can be a powerful weapon in a
farmer's arsenal of weed control and insect protection tools,
these seeds have typically sold for a premium over conventional
varieties. 1 Roundup Ready is a brand name owned by the Monsanto
Company. B-284201 Page 4 GAO/ RCED/ NSIAD- 00- 55 Prices of
Genetically Modified Seeds In response to farmers' concerns about
the pricing of genetically modified seeds, you asked us to provide
you with information on the (1) prices of Roundup Ready soybean
seeds and Bt corn seeds in the United States and Argentina and (2)
major reasons for the price differences, if any, between the two
countries for these seeds. As agreed, we obtained price ranges for
popular varieties of these seeds rather than average prices and
focused on prices paid by farmers in Argentina and in Illinois and
Iowa the two states with the largest soybean and corn acreage in
the United States. The price ranges include technology fees (fees
paid by farmers and others for the use of patented Roundup Ready
soybean and Bt corn seeds) but do not include taxes. 2 Results in
Brief In 1998, available data indicate that the ranges of
commercial prices for popular varieties of Roundup Ready soybean
seeds were higher in the United States than in Argentina. However,
as shown in table 1, for popular varieties of Bt corn seeds there
were no clear differences in prices. 3 Table 1: Price Ranges for
Roundup Ready Soybean and Bt Corn Seeds in the United States
(Illinois and Iowa) and Argentina, 1998 a Price ranges for Bt corn
seeds in Argentina are for 1999, the first year that well-
documented price data were available for this product. Reliable
1998 price data were not available because Bt corn seeds were
first marketed in 1998 and accounted for less than 1 percent of
Argentina's corn acreage. Sources: GAO based its estimates on data
from Doane Marketing Research, Inc., and Argentine industry
sources. 2 Argentine farmers pay taxes on commercial seed; farmers
in Illinois and Iowa do not. 3 Soybean and corn seed prices in the
United States and Argentina are not entirely comparable for a
variety of reasons. For example, seed prices are from different
times of the year to correspond with the different growing seasons
in the United States and Argentina (the second quarter in the
United States and the fourth quarter in Argentina). Other issues
associated with seed prices are discussed in app. I and in a
section on seed prices later in this report. Roundup Ready soybean
seeds per 50 lb. bag Bt corn seeds per 80,000 seed bag United
States $20 - $23 $83 - $122 Argentina $12 - $15 $75 - $117 a B-
284201 Page 5 GAO/ RCED/ NSIAD- 00- 55 Prices of Genetically
Modified Seeds Since we found price differences for Roundup Ready
soybean seeds and not for Bt corn seeds, we focused our analysis
of reasons for price differences on Roundup Ready soybean seeds. 4
We identified two primary reasons for price differences: (1)
greater control over patented seed technology in the United States
and (2) extensive black market sales of soybean seeds in
Argentina. 5 Roundup Ready soybean seeds are patented in the
United States; they are not patented in Argentina. Among other
things, patents give a company more control in setting prices and
restricting a product's use. For example, farmers in the United
States are required to pay technology fees for the use of Roundup
Ready soybean seeds and are not allowed to replant the seeds; this
is not the case in Argentina. A strong black market for seeds in
Argentina has also contributed to lower prices in that country: An
estimated 25 to 50 percent of the soybean seeds grown in Argentina
are sold in violation of Argentina's seed law. The law was
designed, among other things, to protect plant breeders'
intellectual property rights by requiring that all seeds be
certified prior to sale. Background For many years, scientists
have used traditional plant- breeding techniques to develop
improved plant varieties with higher yields and greater resistance
to pests, diseases, and environmental stresses. However,
traditional plant- breeding techniques can be very time- consuming
it sometimes takes up to 15 years or more before a new plant
variety reaches the market. Furthermore, in traditional breeding,
generally only closely related plant species can be used in cross
breeding for the development of new varieties and hybrids.
Biotechnology and, more specifically, genetic engineering enables
scientists to breach the reproductive barriers between species.
Through the use of genetic engineering techniques, genes from one
plant, animal, or microorganism can be incorporated into an
unrelated species, thus increasing the range of traits available
for developing new plants. 4 As discussed elsewhere in this
report, other factors-such as farmers' willingness to pay for the
product and the costs of developing and marketing new varieties-
also affect seed prices. 5 The term black market refers to trade
in goods or commodities in violation of laws and regulations. For
this report, it refers to the sale of soybean seeds in violation
of Argentina's seed law (Act No. 20247; 1973). In addition, taxes
are not collected on these sales, nor are royalties paid to the
seed companies. B-284201 Page 6 GAO/ RCED/ NSIAD- 00- 55 Prices of
Genetically Modified Seeds In the United States, the first
genetically modified food product a delayed- ripening tomato was
marketed in 1994. Since then, genetically modified seeds have
become available for many crops, with Roundup Ready soybeans and
Bt corn being the ones most commonly grown. Roundup Ready soybean
seeds contain a gene that enables the plant to withstand
applications of Roundup an herbicide that is effective against
many types of weeds. Roundup Ready soybean seeds completed the U.
S. regulatory process in 1995 and were marketed in the United
States (as well as in Argentina) in 1996. The Monsanto Company
holds U. S. patents for Roundup Ready soybean seeds that enable it
to restrict the use of the seeds in the United States. 6 Monsanto
licenses the Roundup Ready technology to seed companies, which
incorporate it into their conventional soybean varieties and sell
the genetically modified seeds to farmers. While Roundup Ready
soybean seeds are marketed in Argentina by several seed companies,
Roundup Ready soybean technology is not patented there. 7 Bt corn
provides resistance to several types of insects, including the
European corn borer in the United States and a related pest the
sugar cane borer in Argentina. These borers are major insect pests
of corn, with the European corn borer historically costing U. S.
farmers an estimated $1 billion annually in crop yield losses and
pest control expenditures. Bt corn is produced by modifying hybrid
corn with a gene from Bacillus thuringiensis, a bacterium that
occurs naturally in the soil. The gene produces a protein that
causes European corn borer larvae to die after they feed on the
plant. Bt corn was first marketed in the United States in 1996 and
in Argentina in 1998. Several companies, including the Monsanto
Company, Mycogen Seeds, and Novartis Seeds, hold patents for
various types of Bt corn in the United States and Argentina.
However, in terms of restricting the product's use, patents are
not as important for corn seeds as they are for soybean seeds
hybrid corn seeds have an inherent biological protection because 6
For example, U. S. purchasers are not allowed to save seeds for
replanting in the following year. 7 Monsanto's 1995 application
for a patent for Roundup Ready soybeans in Argentina was rejected.
Monsanto appealed the decision, and an Argentine court overturned
the rejection. Monsanto has petitioned for reconsideration of the
patent application; as of December 1999, the application was
pending. B-284201 Page 7 GAO/ RCED/ NSIAD- 00- 55 Prices of
Genetically Modified Seeds of how they are reproduced.
Specifically, when hybrid corn seeds are replanted, the resulting
offspring do not have the same traits as the parent plant (e. g.,
they have lower yields). In contrast, succeeding generations of
soybean plants are essentially identical to the parent plant.
Thus, farmers do not save and replant hybrid corn seeds, whereas
soybean seeds are traditionally saved and replanted in the
following crop year. Seeds planted in this manner are called
farmer- saved seeds. U. S. and Argentine farmers have readily
adopted Roundup Ready soybean and Bt corn seeds since their market
introductions with adoption rates for Roundup Ready soybean seeds
particularly high. Farmers adopt these products for the perceived
benefits they offer, including increased yields, more flexibility
in crop management, reduced herbicide usage, and decreased pest
management costs. According to a study by the U. S. Department of
Agriculture's Economic Research Service, the benefits and
performance of these crops are expected to vary greatly by region,
pest infestation levels, seed and technology costs, irrigation,
and other factors. Although Roundup Ready soybean seeds were first
marketed in the United States and Argentina in 1996, by 1999 just
3 years later they accounted for an estimated 51 percent and 80
percent of the total soybean acreage in the United States and
Argentina, respectively. (See fig. 1.) B-284201 Page 8 GAO/ RCED/
NSIAD- 00- 55 Prices of Genetically Modified Seeds Figure 1:
Estimated Percentage of Soybean Acreage Planted in Roundup Ready
Soybeans in the United States and Argentina, 1996 Through 1999
Sources: U. S. and Argentine government and industry sources. (See
app. I for specifics on these sources.) Bt corn was marketed in
small amounts in the United States starting in 1996 and in
Argentina starting in 1998. As shown in figure 2, in 1999, U. S.
and Argentine farmers planted an estimated 30 percent and 6
percent, respectively, of their corn acreage in Bt corn. 0 10 20
30 40 50 60 70 90 100 80 1996 1997 1998 1999 United States
Argentina Percentage B-284201 Page 9 GAO/ RCED/ NSIAD- 00- 55
Prices of Genetically Modified Seeds Figure 2: Estimated
Percentage of Corn Acreage Planted in Bt Corn in the United States
and Argentina, 1996 Through 1999 Sources: U. S. and Argentine
government and industry sources. 0 10 20 30 50 60 70 80 90 100 40
1996 1997 1998 1999 United States Argentina Percentage B-284201
Page 10 GAO/ RCED/ NSIAD- 00- 55 Prices of Genetically Modified
Seeds Roundup Ready Soybean Seed Prices Were Higher in The United
States Than in Argentina; Bt Corn Seed Prices Were Similar In
1998, the ranges of commercial prices farmers paid for popular
varieties of Roundup Ready soybean seeds were higher in the United
States (specifically, Illinois and Iowa) than in Argentina. There
were no clear differences in the price ranges of popular varieties
of Bt corn in the two countries. 8 Several issues, however, should
be considered to add perspective in interpreting our price
comparisons. For example, the seed varieties used in the two
countries generally differ. Roundup Ready Soybean Seed Prices Are
Higher in the United States In 1998, the ranges of commercial
prices paid by farmers for popular varieties of Roundup Ready and
conventional soybean seeds were higher in the United States than
in Argentina. In addition, as shown in table 2, Roundup Ready
soybean seeds sold for a premium over conventional soybean seeds
in both countries. Table 2: Soybean Seed Price Ranges, 1998
Sources: GAO based its estimates on data from Doane Marketing
Research, Inc., and Argentine industry sources. 8 See app. I for
details on the methodology we used to develop the price ranges.
The comparison of price ranges reflects how the prices of popular
selling seeds in the two countries are affected by market
conditions but does not permit a precise measurement of price
differences. Per 50 lb. bag Conventional soybean seeds Roundup
Ready soybean seeds United States $13 - $17 $20 - $23 Argentina $8
- $10 $12 - $15 B-284201 Page 11 GAO/ RCED/ NSIAD- 00- 55 Prices
of Genetically Modified Seeds Price Ranges for Bt Corn Seeds Were
Similar There were no clear differences in the ranges of
commercial prices paid by farmers for popular varieties of Bt corn
in the United States and Argentina. Generally, there is a premium
for Bt corn seeds; however, this is not always the case. For
example, as shown in table 3, some Bt corn seed prices are lower
than those of conventional corn seeds. 9 Table 3: Corn Seed Price
Ranges, 1998 a The price range for Bt corn seeds in Argentina is
for 1999, the first year that well- documented price data were
available for this product. Reliable 1998 price data were not
available because Bt corn seeds were first marketed in 1998 and
accounted for less than 1 percent of Argentina's corn acreage.
Sources: GAO based its estimates on data from Doane Marketing
Research, Inc., and Argentine industry sources. Issues Related to
Our Price Comparisons For added perspective in interpreting the
price ranges we identified, several issues should be considered.
First, the agronomic conditions in the United States and Argentina
generally differ, as do the seed varieties used in these
countries, thus preventing a one- to- one comparison of seeds and
seed prices. Second, because of data limitations, we used
different methodologies in constructing price ranges for the two
countries. As a result, prices are not strictly comparable, and a
precise measurement of price differences is not possible. Third,
lower seed prices do not necessarily mean greater profitability in
crop production. While seeds are an important part of a farmer's
production expenditures, other production costs, as well as the
economic environment in which the farmer operates, also affect a
farmer's profitability. 9 The value of genetically modified seeds
is derived from the quality of their germplasm, that is, the
material in seeds that controls heredity (e. g., the ability to
tolerate drought is a hereditary trait) as well as the technology
component (e. g., Bt). Thus, conventional corn seeds with top-
quality germplasm may be priced higher than Bt corn seeds with
less desirable germplasm. Per 80, 000 seed bag Conventional corn
seeds Bt corn seeds United States $72 - $101 $83 - $122 Argentina
$52 - $105 $75 - $117 a B-284201 Page 12 GAO/ RCED/ NSIAD- 00- 55
Prices of Genetically Modified Seeds Finally, the data we present
reflect past conditions. However, the increasing controversy over
genetically modified food may affect seed prices in the future. In
response to consumer concerns about the safety of genetically
modified foods, several countries, including the United States,
are considering labeling requirements that would identify foods
containing genetically modified ingredients. In addition, some
companies are offering price premiums for conventional commodities
to meet potential consumer demand for products that are not
genetically altered. Lower demand for genetically modified
products along with higher prices for conventional commodities
could lower the prices of Roundup Ready soybean and Bt corn seeds.
Major Reasons for Price Differences Greater control over the
patented seed technology in the United States and extensive black
market sales of soybean seeds in Argentina are the two primary
reasons we identified for the difference in price ranges of
Roundup Ready soybean seeds in the two countries. Monsanto's U. S.
patents for Roundup Ready soybean seeds have given it and the
companies to whom it has licensed the technology greater control
over seed prices and has enabled them to restrict the availability
and use of seeds. Extensive illegal seed sales in Argentina have
depressed prices in the legal Roundup Ready soybean seed market.
These factors do not have the same impact on Bt corn seed prices.
Bt corn is genetically modified hybrid corn, and hybrid corn
cannot be easily reproduced from seed. Thus, farmers and others
cannot readily reproduce Bt corn seed for use on their farms or in
the black market. In addition to the two primary reasons we
identified as contributing to price differences in Roundup Ready
soybean seeds, other factors relating to farmers' willingness to
pay for seeds and seed companies' production costs and marketing
strategies also affect seed prices. B-284201 Page 13 GAO/ RCED/
NSIAD- 00- 55 Prices of Genetically Modified Seeds Greater Control
Over Patented Seed Technology Gives Companies More Control Over
Roundup Ready Soybean Seed Prices in the United States Seed
companies have greater control over Roundup Ready soybean seed
prices in the United States as a result of Monsanto's patents on
the Roundup Ready soybean technology. 10 Thus far, Monsanto has
not obtained patent rights for this product in Argentina. Seed
breeders and companies usually seek intellectual property
protection for their new plants and processes. This protection
provides incentives for further private plantbreeding research by
allowing the companies to control the use and availability of the
new technology. Plant variety protection 11 and patents two forms
of intellectual property protection are available in the United
States and Argentina. Patent laws in the United States and
Argentina, although different, enable seed companies to obtain
greater control and protection than plant variety protection laws.
12 Monsanto applies patent protection restrictions through
licensing agreements with seed companies in the United States that
use Roundup Ready technology in their soybean varieties. This
patent protection has enabled Monsanto, and its licensees, to
require U. S. farmers to pay technology fees for each bag of seed
purchased the current technology fee is $6.50 a bag and to sign
agreements restricting their use. 13 For example, farmers may not
save Roundup Ready soybean seeds for replanting. Farmer- saved
seeds, the use of which is a traditional practice throughout the
world, are still used in the United States for conventional
soybeans and other nonhybrid crops. The technology agreement also
10 The patents on the Roundup Ready soybean technology expire on
July 10, 2007. 11 Plant variety protection laws in each country
allow plant breeders to exclude others from producing or
commercializing material of a specific plant variety for a period
of time. In the United States, see the Plant Variety Protection
Act, as amended, codified generally at 7 U. S. C. 2321 et seq.
(1970). In Argentina, see The Approval of the International
Convention for the Protection of New Varieties of Plants, codified
in Act No. 24. 376 (1994). 12 In the United States, companies can
obtain patents on, among other things, plants, genetic alteration
processes, or genetic sequences. In Argentina, companies can
generally obtain patents on genetic alteration processes or
genetic sequences that do not currently exist in nature. U. S. and
Argentine industry representatives agreed that U. S. patent law is
well established and defined, whereas the Argentine patent law is
relatively new and untested for plants. 13 Monsanto charges a fee
for using the Roundup Ready soybean seed technology as part of a
purchase agreement. Some seed companies list the technology fee
separately on seed invoices; others incorporate it into the seed
price. Also, although Roundup Ready soybean seeds are not patented
in Argentina, Monsanto has agreements with other seed firms in
Argentina allowing them to use the Roundup Ready technology in
their seeds. B-284201 Page 14 GAO/ RCED/ NSIAD- 00- 55 Prices of
Genetically Modified Seeds stipulates that the purchaser may not
supply saved seeds to anyone else for replanting. Monsanto has not
yet received a patent in Argentina for the Roundup Ready soybean
seed technology, although seed companies have sold Roundup Ready
soybean seeds since 1996. Thus, Monsanto does not require
Argentine farmers to sign purchase agreement, nor does it charge a
technology fee on Roundup Ready soybean seed purchases. Similarly,
Argentine farmers can legally save and replant Roundup Ready
soybean seeds. According to Monsanto, it is not feasible to charge
a technology fee on soybean seeds in Argentina without patent
protection. In contrast, Monsanto does charge a technology fee to
farmers for its Bt corn in Argentina, for which it holds a patent.
14 The patent- related restrictions that protect Roundup Ready
soybean seeds in the United States from being saved and replanted
are not as relevant for Bt corn seeds. Hybrid corn is produced by
using two unrelated parent lines (plants). The hybrid traits of
the resulting plant are diminished if its seed is replanted. Plant
breeders guard the parent lines of hybrid corn as trade secrets
and, thus, control the availability of the hybrid seed. As a
result, although Monsanto and several other companies hold patents
for various types of Bt corn seeds in both countries, patent
restrictions on saving and replanting seeds are not necessary for
Bt corn, while they are for Roundup Ready soybean seeds. Black
Market Sales of Soybean Seeds in Argentina Have Depressed Seed
Prices Extensive black market sales of soybean seeds (primarily
Roundup Ready soybean seeds) in Argentina ranging from 25 to 50
percent of all soybean acreage have depressed the prices of
legally sold seeds. 15 According to Argentine government and
industry officials, seed companies have lowered the prices of
Roundup Ready soybean seeds to enable them to better 14 In 1999,
the technology fee for Monsanto's Bt corn was $30 a bag in
Argentina and $24 a bag in the United States. According to
Monsanto officials, the technology fee was higher in Argentina
because Bt corn generally provides greater benefits to Argentine
farmers. Argentine seed dealers and farmers said that Bt corn
provided protection against two types of pests and provided
greater stalk strength a particularly important benefit in
Argentina's climate. 15 According to Argentine industry officials,
black market seed is sold principally by seed multipliers (local
firms that produce seed for the major seed companies and pay
royalties to the companies), grain elevator operators, and farmers
who sell their saved seed to other farmers. B-284201 Page 15 GAO/
RCED/ NSIAD- 00- 55 Prices of Genetically Modified Seeds compete
for sales and market share. As shown in table 4, the market for
illegal seed sales is significantly higher in Argentina than in
the United States. While farmer- saved soybean seeds are also used
in Argentina in large numbers, these seeds are at least one
generation old. Black market seeds, on the other hand, are
sometimes the same varieties as those sold commercially and thus
may have newer, more desirable traits than farmersaved seeds.
Table 4: Sources of Soybean Seeds a While Monsanto's patents
enable it to restrict U. S. farmers from saving and replanting
Roundup Ready soybean seeds, conventional soybean seeds can be
legally replanted. In Argentina, all saving of seed Roundup Ready
and conventional is legal as long as the seed is replanted only on
the farm where it was originally grown. Sources: U. S. and
Argentine government and industry officials. Argentina's seed law
prohibits the sale of all uncertified seeds, conventional and
genetically modified. 16 The certification program was designed in
part to protect the intellectual property rights of plant breeders
thus, it serves as a form of plant variety protection. This
protection provides a legal basis for seeking prosecution of
anyone involved in the unapproved reproduction and sale of the
plant breeders' discoveries. A group of Argentine seed companies
and breeders, called the Argentine Association for the Protection
of Plant Varieties, in cooperation with the government, have had
an effort under way since 1990 to enforce the law and limit the
sale of uncertified seed on the black market. The effort helped
reduce black market sales from about three- quarters of all
soybean seed sales in 1992 to about half in 1994. However,
according to Source of seeds Estimated percentage of total
soybeans planted United States Argentina Commercial sales 80- 85
28- 50 Farmer- saved a 15- 20 25- 35 Black market sales 0- 2 25-
50 16 Act No. 20247, section 9, requires, among other things, that
seed bags contain a label with unique identification and
certification information. Sales of seed without this information
are prohibited. B-284201 Page 16 GAO/ RCED/ NSIAD- 00- 55 Prices
of Genetically Modified Seeds Argentine industry officials, black
market sales subsequently increased in response to higher prices
for commercial seeds following the initial marketing of Roundup
Ready soybean seeds in 1996. To compete with black market sales,
seed companies lowered the commercial price of Roundup Ready
soybean seeds from 1997 through 1999. According to an Argentine
seed dealer, the commercial price reductions have led to recent
decreases in sales of black market Roundup Ready soybean seeds.
Prices for commercially sold conventional soybean seeds were also
eroded by the falling price of Roundup Ready soybean seeds. As
shown in figure 3, since 1997, the average commercial price paid
for Roundup Ready soybean seeds dropped significantly in Argentina
from about $25 for a 50- pound bag in 1997 to about $9 in 1999. As
a result, the average commercial price of Roundup Ready soybean
seeds has moved closer to the average prices of black market
Roundup Ready and commercial conventional soybean seeds. B-284201
Page 17 GAO/ RCED/ NSIAD- 00- 55 Prices of Genetically Modified
Seeds Figure 3: Average Prices of Soybean Seeds in Argentina, 1997
Through 1999, per 50 lb. bag Sources: GAO based its estimates on
data from Argentine industry sources. As shown in figure 4, U. S.
prices were relatively flat over the same period. $0 $5 $10 $15
$20 $25 $30 1997 1998 1999 Roundup Ready Certified Seed Roundup
Ready Black Market Seed Conventional Certified Seed B-284201 Page
18 GAO/ RCED/ NSIAD- 00- 55 Prices of Genetically Modified Seeds
Figure 4: Average Prices of Soybean Seeds in the United States,
1997 Through 1999, per 50 lb. bag Sources: GAO estimates based on
data from Doane Marketing Research, Inc., and other industry
sources. The black market for hybrid corn seed is negligible.
Hybrid corn is produced by using parent lines that are usually
maintained as trade secrets by seed companies or organizations
associated with plant breeders. The offspring of hybrid corn do
not demonstrate the same traits as the parent plant and, thus,
hybrid corn seed cannot be readily reproduced for illegal sale.
Similarly, for all practical purposes, hybrid corn seed cannot be
saved and replanted by farmers thus, making less important the
need for patentrelated restrictions on replanting saved seeds.
Other Factors Contribute to Price Differences In addition to the
primary reasons we identified for seed price differences in the
United States and Argentina, other factors relating to farmers'
willingness to pay for seeds and companies' marketing strategies
and production costs contribute to price variations. $0 $5 $10 $15
$20 $25 1997 1998 1999 Roundup Ready Seed Conventional Seed B-
284201 Page 19 GAO/ RCED/ NSIAD- 00- 55 Prices of Genetically
Modified Seeds The amount a farmer is willing to pay for seeds
depends on factors such as crop yields, commodity prices, and the
costs of other agricultural inputs. For example, higher commodity
prices may increase a farmer's willingness to pay more for seeds.
The economic environment in which a farmer operates (including
taxes, subsidies, and credit conditions) also affects how much a
farmer will pay for seeds. In Argentina, the sales tax on seeds
may make farmers less willing to pay higher prices for soybean
seeds, 17 which may partially explain why conventional soybean
seed prices are lower there than in the United States. 18 In the
United States, subsidies (e. g., subsidized crop insurance and
loan deficiency payments) and lower interest rates for credit may
increase a farmer's willingness to pay and, thus, contribute to
higher seed prices. Prices may also vary in response to seed
companies costs of producing seeds and operating in different
market environments. In addition, seed firms that are closely
affiliated with pesticide companies may make seed pricing and
marketing decisions that complement their pesticide products.
Thus, in determining the price structure for its seeds and
pesticides, a company would consider the prices that competitors
in the local market charge for these products. Scope and
Methodology To determine the price of seeds in Argentina and the
United States, we purchased market research data; obtained price
information from seed companies, dealers, and farmers; and
interviewed government and industry officials in the United States
and Argentina. With these data, we developed price ranges for
popular seed varieties for 1998 (1999 for Bt corn seeds) and
trends in seed prices from 1997 through 1999. To identify the
major reasons for price differences, we interviewed government and
industry officials and university researchers and farmers in both
countries. We also reviewed literature on intellectual property
rights and pricing issues. We confirmed the seed price data in
this report with government and seed industry officials in the
United States and Argentina and other experts. We performed our
review from July through December 1999 in accordance with
generally accepted government auditing standards. Appendix I
provides details on our scope and methodology. 17 In Argentina,
farmers pay a 21- percent value- added tax on seed purchases. The
farmers recover a portion of this tax when they sell the commodity
at harvest thus, their net tax burden is about 12 percent. There
is no sales tax on seed purchases in Illinois and Iowa. 18
Argentine corn producers, on the other hand, cannot avoid the
sales tax because hybrid corn seeds cannot be readily replanted by
farmers or reproduced for sale on the black market. B-284201 Page
20 GAO/ RCED/ NSIAD- 00- 55 Prices of Genetically Modified Seeds
As arranged with your office, unless you publicly announce the
contents earlier, we plan no further distribution of this report
until 30 days after its issue date. At that time, we will provide
copies to interested congressional committees and the Honorable
Dan Glickman, Secretary of Agriculture. We will also make copies
available to others upon request. If you have any questions
regarding this report, please contact us Robert Robertson at (202)
512- 5138 or Susan Westin at (202) 512- 3655. The key contributors
to this report are listed in appendix II. Sincerely yours, Robert
E. Robertson, Associate Director, Food and Agriculture Issues
Susan S. Westin, Associate Director, International Relations and
Trade Issues B-284201 Page 21 GAO/ RCED/ NSIAD- 00- 55 Prices of
Genetically Modified Seeds Page 22 GAO/ RCED/ NSIAD- 00- 55 Prices
of Genetically Modified Seeds Appendix I Appendi xes Scope and
Methodology Appendi x I The Chairman, Subcommittee on Risk
Management, Research, and Specialty Crops, House Committee on
Agriculture, asked us to provide information on the (1) prices of
Roundup Ready soybean seeds and Bt corn seeds in the United States
and Argentina and (2) major reasons, if any, for price differences
between the two countries for these seeds. Prices for Seeds in the
United States and Argentina To determine the price ranges for
popular varieties of these seeds in the United States, we used the
results of a survey of Illinois and Iowa farmers from Doane
Marketing Research, Inc. Questionnaires were sent to a panel of
over 900 farmers a representative sample of the total population
of farmers with $2, 500 or more gross annual agricultural income
in Illinois and Iowa. 1 Prices paid by the survey respondents were
calculated to include discounts (e. g., volume discounts) and
technology fees, but did not include promotional seed given to
farmers. We used Doane's survey results to identify the 10 best-
selling corn hybrids (Bt and conventional) and soybean varieties
(Roundup Ready and conventional) in Iowa and Illinois. The
varieties with the highest and lowest average price per unit
within the group of top sellers formed the price ranges. Several
seed company officials and other experts generally confirmed the
U. S. price ranges that we report. We used a different methodology
to construct the price ranges in Argentina because different types
of data were available from different sources. For the Argentine
prices, we constructed the price ranges for popular seed varieties
using government and industry (e. g., seed companies and
distributors) retail prices and farmer discount data. Argentine
government and industry officials also identified the popular
varieties of Roundup Ready and conventional soybean seeds and Bt
and conventional corn seeds. We used 1998 prices for Roundup Ready
and conventional soybean seeds and conventional corn seeds.
Because less than 1 percent of Argentina's corn acreage was
planted with Bt corn in 1998 and welldocumented price information
was not available, we used prices from 1 We did not verify the
validity of all of the price data provided by Doane Marketing
Research. We obtained survey instruments and other documents in
order to review the survey methodology, wording of questions,
sampling, and mode of administration. Although about one- third of
the over 900 Illinois and Iowa farmers returned the survey, Doane
did not analyze the differences between responders and non-
responders. However, analyses for prior surveys showed no
statistical differences between the two groups. We also checked
for consistency within the data set and for outliers. Doane's data
are considered reliable by many seed companies that purchase the
data to complement their marketing information. Appendix I Scope
and Methodology Page 23 GAO/ RCED/ NSIAD- 00- 55 Prices of
Genetically Modified Seeds Argentina's 1999 growing season when an
estimated 6 percent of its corn acreage was planted with Bt corn.
Argentine government and seed industry officials generally
confirmed the seed price ranges that we report. To calculate the
average prices paid for soybean seeds from 1997 through 1999
(shown in figs. 3 and 4), we used different data sources and
methodologies than we used to determine price ranges. The average
prices are useful for showing price trends but are less reliable
for comparing price differences between the two countries. The
data on average commercial Argentine soybean seed prices are based
on (1) estimates of several seed industry officials for 1997 and
(2) published seed price lists for 1998 and 1999. The average
prices for the United States were constructed using (1) estimated
farmer adoption rates for Roundup Ready soybeans and (2) Doane's
survey data for Roundup Ready and all soybean seed prices. Seed
industry officials in the United States and Argentina generally
confirmed the price trends observed in both figures. All prices in
our report are reported in nominal U. S. dollars. Since 1991, the
Argentine peso has been pegged to the U. S. dollar, with one peso
being equal to one dollar. Reasons for Price Differences in the
United States and Argentina To determine the reasons for soybean
seed price differences in the United States and Argentina, we
analyzed documents and other information obtained in interviews
with officials from industry (seed companies, associations, seed
dealers, and farmer organizations); government; university
researchers; and farmers in Illinois, Iowa, and Argentina. We
interviewed officials in the United States and Argentina from a
number of seed companies, including the Monsanto Company; Pioneer
Hi- Bred International, Inc.; Novartis Seeds, a division of
Novartis Corporation; Nidera S. A.; Asociados Don Mario; and
Morgan Seeds and Mycogen Seeds, subsidiaries of Dow AgroSciences.
We interviewed officials from Argentine seed distribution
companies, including: Desab S. A., Agronort, Centro Agropecuario
Modelo, 3- El Semillas, and Francisco Celeart, S. A. In Illinois
and Iowa, we interviewed seed dealers for Pioneer Hi- Bred Seeds,
as well as seed marketing officials from agricultural supply
firms. We discussed the role of intellectual property rights and
black markets with seed company officials, government officials,
associations, patent attorneys, and economists in both countries.
We examined statements and Appendix I Scope and Methodology Page
24 GAO/ RCED/ NSIAD- 00- 55 Prices of Genetically Modified Seeds
policies of the World Trade Organization's Agreement on Trade-
Related Aspects of Intellectual Property Rights, the International
Association of Plant Breeders for the Protection of Plant
Varieties, the International Union for the Protection of New
Varieties of Plants, and the Convention on Biological Diversity.
We also reviewed literature on the economic impact of intellectual
property rights and seed piracy. We interviewed Argentine
government officials from the National Institute of Industrial
Property, the National Service of Agrifood Health and Quality, the
National Institute of Agricultural Technology, the National
Advisory Committee on Agricultural Biotechnology, and the National
Seed Institute. Argentine associations providing information
included the Argentine Seed Association and the Society of Rural
Argentina (a farmer organization). We also interviewed and
collected information from officials from the U. S. Department of
Agriculture's Foreign Agricultural Service, National Agricultural
Statistics Service, Agricultural Marketing Service, Economic
Research Service, the Office of the U. S. Trade Representative,
the U. S. Plant Variety Protection Office, and the U. S. Patent
and Trademark Office. Associations in the United States that
provided interviews and documents included the National Corn
Growers Association, Illinois Corn Growers Association, United
Soybean Board, and the American Seed Trade Association. Finally,
we interviewed extension agents in Illinois and Iowa, state seed
control officers, and officials from the Illinois and Iowa State
Departments of Agriculture and the Illinois and Iowa Farm Bureaus.
We used seed prices from 1997 through 1999 to study price trends
for genetically modified and conventional seeds in the two
countries. The anecdotal information on prices provided by
industry and government experts in the seed industry in Argentina
and the United States was supported by the trends we observed in
the data. Page 25 GAO/ RCED/ NSIAD- 00- 55 Prices of Genetically
Modified Seeds Appendix II GAO Contacts and Staff Acknowledgments
Appendi x II GAO Contacts Robert E. Robertson, (202) 512- 5138
Susan S. Westin, (202) 512- 3655 Jerilynn B. Hoy, (202) 512- 9837
Acknowledgments Dennis Richards, Kerry Dugan Hawranek, Alan R.
Kasdan, Beverly Peterson, and Samantha Roberts also made key
contributions to this report. (150150) Lett er Ordering
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