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How Long Until Big Agriculture Takes Over Cannabis?

Could cannabis become swallowed up by the oligopoly of Big Ag?

Image: Corteva Agriscience

Watermelons taste the same season after season. The carrots in your grocery store remind you of all the carrots you have ever tasted. The numbing consistency in our fruits and vegetables is due to a seed genetic monopoly decades in the making.

How Big Agriculture Took Over Food

Phillip Howard, PhD, Associate Professor in the Department of Community Sustainability at Michigan State University, warned consumers and the public alike in 2008, when he published a seed industry consolidation chart that highlighted 6 companies – Monsanto, DuPont, Syngenta, Dow, Bayer, and BASF. Professor Howard’s most recent updates show how consolidation and the seed monopoly has tightened to just four companies – Bayer, Corteva [CTVA] (a new firm from the merger of Dow and Dupont), ChemChina and BASF.

These mega-mergers along with vertical and horizontal restructuring – which include seeds, fertilizers and machinery – have told farmers what to grow and how to grow it. In a recent article in The New York Times, Dan Barber puts the monoculture now implicit in farming like this: “The tens of thousands of rows surrounding me owed their brigade-like uniformity to the operating instructions embedded in the seed…[the seed] determines the size and model of the combine tractor needed…The type of seed also dictates the fertilizer, pesticide and fungicide regimen, sold by the same company as part of the package…It is as if the seed is a toy that comes with a mile-long list of component parts you’re required to purchase to make it function properly.” This section and the rest of the article shows the reinforcement by suppliers – supply chains are microscopically short – of the industrial food and farming model. 2015 is really the year this type of market reached its peak as record M&As occurred across the agri-food sector like Heinz and Kraft Foods, AB InBev and SABMiller, and Dow Chemical and Dupont. 2016 saw ChemChina purchase Swiss agrochemical giant Syngenta. In 2017, more agri-food mergers occurred including the takeover of Monsanto by Bayer and Agrium by Potash Corp.

As consolidation increased, these dominant firms started making more defensive investments and snatching up plant genomics was one of the biggest power moves on the chessboard. Following this, firms simply protect patents and create high barriers for entry by suing small farmers. The seeds chosen to patent and sell have input traits returning the most investment for the least risk, and right now three companies own 60% of all proprietary seeds worldwide. Often, the Big Four restrict access to smaller growers, but license out exclusive patents to each other limiting product introduction, innovation and leveraging market share.

This oligopolistic reality has been known to the US Department of Agriculture for some time. A 2011 study found the largest four firms in each sector accounted for more than 50% of global market sales – well beyond the 40% benchmark of an oligopolistic market. By 2014, 4-firm concentration in at least four of these sectors had continued to increase – ranging from 54% to 62% share of global market sales.

Now, some of the same actors that turned agri-food into a consolidated oligopoly with small family farmers who can’t compete in the industry their parents birthed is coming for the newest cash crop: cannabis.

Phylos: The Opening of Pandora’s Box

This year, in a stunning disclosure, Phylos Bioscience, a champion for cannabis growers and their intellectual property announced it was launching its own breeding program. This news roiled the entire cannabis industry as Phylos was one of the first science-based firms to protect growers through their “plant sex test” and their “plant genotype test.” The latter of which added growers’ plants into the larger Phylos Galaxy project enabling cultivars to get genetic sequencing for free. At last count, the Phylos Galaxy had 3,000 samples from 80 different countries, making it the largest database of cannabis genetics in the world. And, as all this data was public information, it would be extremely difficult for big agricultural companies to patent it as they had done in food.

So, the announcement of a company breeding program – not to mention a board now full of former Syngenta members – was considered a betrayal to small cannabis growers, and a veiled acknowledgement that all those samples growers sent in were being used for Phylos’s gain. This betrayal only intensified when video footage from the Benzinga Cannabis Capital Conference in Miami in February was leaked. In the footage, Mowgli Holmes, CEO of Phylos, introduces the Syngenta board members and even the former VP of technology acquisition of Dow and Dupont saying: “So, having these guys around is just critical for us, because we’re building a company that is ultimately going to be acquired by that universe.” This bare admission stood in stark contrast to Holmes’s previous official statement that Phylos wouldn’t compete with breeders.

The hypocrisy of Phylos and Holmes is even more hard to stomach when reviewing a feature in Wired, where he acknowledges skepticism toward the Phylos project by stating to the magazine: “There is justifiable paranoia. Small growers are fighting for their lives right now…They have never seen an ag company that’s been a good actor.”

Most hoped Holmes was different. He grew up in a commune in the woods in Oregon and attended Columbia for his molecular biology PhD. Later in the Benzinga video, Holmes told investors that all the cannabis around today would soon be gone, replaced by optimized new varieties that Phylos would develop. After the full video leaked, important growers who had stood by the project and even employees left and quit, respectively. It seems Holmes was lying all along. In May, the Phylos Galaxy project shut down. The company’s board blogged this message: “Through it all, and despite our best efforts, we’ve been called a fraud, a scam, and a cover for some kind of secret plot. At first, we thought it was simply a technical misunderstanding of the subject matter. Now we know that there is truth to some of these fears.”

Still, many fear that Pandora’s Box has been opened and Holmes’s open project will now be the foundation for Big Ag to enter cannabis and create different varietals that will supersede small growers making them irrelevant to the future of the industry for which many toiled and even went to jail.


Equities Contributor: Stephen L. Kanaval

Source: Equities News

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