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Corn+Soybean Digest

The Difference A Decade Will Make

You ain't seen nothing yet. Not in the world of biotechnology - and the changes it will bring to agriculture, anyway.

"We aren't even done mapping genes yet," says Texas A&M ag economist Danny Klinefelter. "The question isn't what direction biotechnology will take us, but how fast we'll get there."

The picture in Klinefelter's crystal ball isn't a pretty one for a lot of folks. And, while the details aren't crystal clear to Klinefelter, the big picture is obvious.

"There's going to be an alternative way of doing business in agriculture," he says. "I don't know exactly what it will look like, but it will be something like a franchise."

The people painting the picture of the future will be from biotechnology companies that are looking for a select group of farmers to grow specialty crops for them, Klinefelter says.

"Initially, they'll be more concerned about volume and will use performance-based criteria to select farmers. Eventually, they'll get it down to a minimum number of farmers they're comfortable with."

He doesn't see consumer opposition to bio-engineered grains as a long-term threat.

"There's no question that it will grow by fits and starts in the beginning due to consumer concerns and legal challenges. But there are a lot of things that will drive it. When we get past the initial resistance, you'll see the industry expand into areas that will require large volumes of production. Eventually, people will eat foods that have been genetically designed specifically for them with health and nutritional benefits built in. There are no limits in a market like that."

Those food products will be designed, produced, processed and delivered via an integrated value chain, Klinefelter says.

"There are a lot of reasons why consolidation is occurring so rapidly. These companies need to be able to control their patented materials and assure the quality and quantity of the product. Some farmers don't know if they want to get into those kinds of contracts. But, in the long run, if you're not in the value chain, you're screwed. If you choose to stay outside the chain, good luck trying to get access to new technology and its markets."

One-year contracts will become a thing of the past as biotech companies tie up the acres they need and select the group of growers they want to farm them, says Klinefelter.

"Growers also will want some assurances for the investments they'll be required to make in technology. It will require a different form of relationship. It will become more formal and require more commitments from both sides. The contracts will definitely have to change. The markets just haven't matured enough yet to start the process."

It will take a different kind of farmer to survive in those markets.

"To stay in business you'll have to look at change as good, not bad; an opportunity, not a kick in the teeth," says Deb Rood, program director for the ag economics department at the University of Nebraska. "Agriculture isn't going to change so much that we won't use today's expertise, but farmers will need a broader vision of what agriculture is. They'll have to change with markets to stay profitable."

Communication skills will define the farmer of the next decade, believes Rood.

"Relationships will play a major role. You'll need to be able to communicate and negotiate with people beyond the local co-op. You'll be part of a food system that requires you to deal directly with lenders, suppliers and the public. It will be a people-oriented business and you'd better be able to adapt. You won't be nearly as independent and you'll have to rely more on others."

While you'll give up some independence, you'll benefit on the risk management side of your operation, believes Klinefelter.

"Just like the car industry, the biotech industry will likely take financing away from the banks. It's an obvious way to make more money while helping growers," he says. "It's a way for farmers to reduce costs. The more assurances like that, however, the less freedom you'll have. But you can't afford to stay out."

Not all farmers see these changes as bad, but rather a continuing trend. In a recent Soybean Digest reader survey that questioned farmers' attitudes about their future, one respondent noted, "Agriculture will always have a future. People always need to eat. Cheap food has always been a priority, and it is up to us to see that we keep up with technologies that keep America on the leading edge."

Often, these changes aren't necessarily all good, but they are inevitable, Klinefelter adds. "It's not just an issue of efficiency. The driving forces really are the consumer and lawyers."

After spending billions of dollars to build an industry, biotech companies are structuring to protect themselves from potential lawsuits, he explains.

"It would only take one food industry scare and the biotech companies would be facing the same lawsuits that the tobacco companies have seen. The biotech companies have to structure and manage themselves knowing that an event could occur. They need to be able to minimize the damage, which means being able to pinpoint every step of the process with traceback capabilities.

"I'm not saying that it's good. But, it's reality. Look how the whole medical field changed when malpractice legislation was introduced. Lawyers run this country. People forget sometimes how big a factor it is. In some ways, biotech companies are simply being proactive."

Those same issues will bring a new set of regulators to agriculture, as well. EPA and FDA will replace USDA as the government agencies controlling agriculture, he believes.

"Environmental and food safety issues will get bigger and farm programs won't be as much of an issue as farms also get larger," Klinefelter says. "EPA and FDA are much more likely to serve consumers and voters. They'll be there to regulate, not advocate." ?

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