Issue 26
February 2000

Prairie Grains is the official publication of the Minnesota Association of Wheat Growers, North Dakota Grain Growers Association, South Dakota Wheat, Inc., and the Minnesota Barley Growers Association.

Copyright
Prairie Grains Magazine
February 2000

Changes in production ag sector will bring winners, losers

Want to be a winner when the dust settles on all the changes taking place in agriculture, including the impact of biotechnology? Then make sure the following is included in your farming game plan:

• Broad managerial and learning capabilities
• Flexibility in developing new enterprises and strategies
• Ability to work closely with researchers and others in the ag sector to aggressively manage changes
• Ability to achieve economies of scale through innovative business structures and cooperation with others
• Discipline

So says Robert Napier, associate professor in farm management at Orange Agricultural College, University of Sydney, Australia.  Napier outlined what he sees as consequences of paradigm changes in agriculture in the 21st Century, in a recent paper: "The Impact of Biotechnology On The Production Sector: Will Farmers Be Winners Or Losers?"

Napier says losing farmers may well find that the advantages of biotechnology erode through the "treadmill effect"—the depressing effect of increased productivity on prices. The key challenges for winning farmers if they are to improve profitability through biotechnology lies in their ability to add value to what they produce, he says.  Further, as the agricultural sector becomes increasingly integrated with more tightly coordinated supply chains as specific pharmaceutical, nutraceutical, and industrial products develop, farmers will need to move quickly and decisively to become part of win-win "farm gate to consumer market" alliances.

The structural changes affecting agriculture should not be surprising, as they have already occurred in many other industries such as motor vehicle manufacturing and banking, he says.

As products of biotechnology and other key changes in agriculture (as outlined in figure 1) take hold, many aspects of farm management will be impacted:

Information management—Accurate and comprehensive information management systems will be necessary to meet recordkeeping, analysis and learning requirements associated with new technologies and farm methods.
On-farm research—Farmers will need to measure productivity changes with introduction of new technologies and farm methods.
Cropping patterns— Biotechnology products may require closely controlled cropping patterns (which may extend beyond individual farms) to maintain pest and disease resistance and/or prevent cross-pollination with conventional crops.
Cropping management—Genetically—modified crops may require more precise management, different crop rotations and new approaches to integrated pest management.
Costs and yields—Decisions on use of genetically-modified crops will require careful analysis of benefits and costs.  Seed prices are expected to be subject to market forces and related to productivity gains.
Risk management—Farmers will have potential new risk areas, especially related to liabilities for product specifications, environmental damage and failure to comply with contractual obligations to biotechnology companies.  Access to legal expertise will be essential.
Quality assurance—Biotechnology products, especially for value-added markets, will require comprehensive quality assurance systems.
Identity preservation—Biotechnology products may require separate storage and handling with identity-preserved distribution and processing channels.
More interdependence—High levels of interdependence will occur throughout the input and supply chains.  Biotechnology companies may own products all the way through the chain.
Marketing skills—Farmers will need professional negotiation and marketing skills, especially for niche products.
Competitive position—If new technologies have advantages, then those who do not adopt them may eventually be uncompetitive.
Image—Farmers will need a disciplined, professional image to build trust and win-win relationships throughout the supply chain.

Biotech 2000 backgrounders

The National Corn Growers Association and the American Soybean Association both have online backgrounders to help producers with biotech/nonbiotech planting decisions in 2000.

The NCGA website (www.ncga.com) includes information on approved and unapproved corn hybrids, including transgenic hybrids, under the link "Know before you grow/Know where to go."  There's also a backgrounder "Genetically Modified Crops: Guidelines for Producers."

The ASA website (www.oilseeds.org/asa/frontdoor.htm) features the backgrounder "Factors Affecting the Demand for Biotech and Conventional Soybeans in 2000," including considerations in establishing an identity-preserved (IP) production contract.

Another good site for keeping track of ag biotech issues: www.agribiz.com managed by Frank Beurskens Consulting, Inc.