Bad Recipe For Food System Security:
1. Combine Equal Parts Corporate Power, Lax Government Oversight, Short Term Bias of Capital Markets.
2. Stir in a Scary Secret Mystery Ingredient.
3. Bake in Climate Change.
4. Sprinkle Generously with Record Corporate Profits
5. (For Best Results, Let Stew in the Midst of a Deep Recession)
Genetically Modified Organism. Despite having been a part of our lexicon for about twenty years now, the term continues to raise significant controversy and concern among the U.S. public, scientists, and farmers. A June 2011 ABC News poll found that 93 percent of Americans believe that genetically modified foods should be labeled. If such foods were labeled, most people – 57 percent, by ABC’s numbers – would use such labels precisely to avoid them.
Despite consumer opposition, adoption of transgenic crops has been rapid in the U.S., but limited in the main to the major commodity crops, of which genetically engineered varieties now make up the vast majority: soybean (93% transgenic in 2010), cotton (88%) corn (86%), and canola (64%).
In Europe, on the other hand, the regulations on cultivation, importation, and marketing of GMOs are quite strict. Only two crops have been permitted and their already limited cultivation declined by 23 percent between 2008-2010, to a total of approximately 82,000 hectares (200,000 acres), as Austria, France, Germany, Greece, Hungary and Luxembourg banned the main EU-authorized crop, a Monsanto transgenic corn, and another (Bulgaria) banned all potential transgenic varieties.
Consumer antipathy means that GMO food crops command much lower prices in the marketplace than their conventional counterparts. To get a sense of what we’re talking about, head down to your local supermarket and check out the price difference between organic and non-organic milk. That cost differential you’ll see is reflecting the fact that the growth rate for organic foods remained in the double digits for the eleventh straight year in 2008.
USDA Organic rules of course strictly prohibit genetic engineering, and most export markets require testing and labeling. Conventional and organic farmers are acutely aware of these market dynamics, which explains why they are afraid that GMO pollen will inadvertently “drift” into their fields, cross pollinating with their non-GMO plants and reducing their value.
This also explains why 83 family farmers, family owned seed businesses, and agricultural organizations filed papers in federal court several months ago seeking legal protection from the threat of being sued by Monsanto for patent infringement should their product ever become contaminated by GMO material. This lawsuit probably portends a trend. Farmers are likely to increasingly turn to the legal system for recourse from the financial impacts of GMO genetic drift. I know I’d certainly sue if my neighbor he devalued my home with chemicals that most people consider poison.
As such lawsuits make their way through the courts, it is nearly inevitable that the corporations who hold the patents on these crops will be on the hook for costs associated with the “responsible” use of their products. In the past two decades, the agricultural biotechnology industry emerged through the rapid acquisition of existing seed firms by chemical and pesticide companies such as Monsanto, DuPont, Syngenta and Dow. If these multi-national chemical companies were to be held liable for costs associated with the predictable release or poor results of their products, shareholders would see their accounts dramatically reduced.
How dramatically?
We don’t know.
Why don’t we know?
Because the companies don’t disclose enough information for us to make accurate calculations.
The patents that these companies own provide control of their research and as such, academics cannot do any independent research. Further, even if they can get permission to test the seeds, the corporations retain the right to deny right to publish if they wish. This particularly matter in an era of climate change, “superweeds,” and super pests.
From the data we do have however, the potential liabilities seem scary. Like a billion dollars scary.
Take for example the LibertyLink rice case in which 10,000 rice farmers recently settled for $750 million after it was found that Bayer-patented GMO rice escaped from a test plot and was found to have caused widespread contamination. I heard estimates Bayer could have been on the hook for well over a billion dollars, so they might have gotten off easy this time.
And then there was the Starlink GMO corn that was discovered in the US food supply in 2001. That corn was approved for animal feed but not human consumption because of allerginicity. The estimated overall cost of this major contamination debacle to Aventis CropScience, StarLink’s developer, as well as farmers and the food industry, has been estimated at $1 billion. Glad I didn’t own that stock back in 2000!
Those sorts of liabilities seem like something any investment professional ought to take into consideration when considering an investment, right? Well, very few do.
The environmental and social risks that associated with irresponsible corporate behavior are too often regarded as “extra financial” considerations by those within the finance industry. Ironically, “extra financial” too often takes on a different connotation once they are actually realized in the form of a disaster or lawsuit – as in “extremely costly.”
To go down a brief list of some recent lawsuits that wiped out shareholder value due to corporate irresponsibility:
• In a June, 2011 ruling indicating that good business ethics are worth more than karma points, a court ruled that Quest Diagnostics will have to pay $241 million to settle a suit charging the laboratory with overbilling California state medical patients.
• Novartis Pharmaceuticals Corp. shareholders – many of them no doubt women – were probably pretty bummed to learn they will be paying $175 million to resolve a gender discrimination class action.
• GlaxoSmithKline recently settled for $750 million to put a False Claims Act case behind it. The company faced allegations that it had manufactured and distributed defective and adulterated drugs. Do you even know if GSK is in your portfolio? There’s a good chance it is (unless your investment advisor divested for related issues a few years ago.)
Costly lawsuits like these can do real damage to a portfolio. That is why the firm that I work for, Harrington Investments, has just partnered with Pesticide Action Network of North America to file a shareholder resolution asking Monsanto Corporation to publish a study on financial risks associated with transgenic drift. If the resolution gets enough support at next year’s annual meeting, Monsanto executives will hopefully feel pressured to help shareholders and citizens alike better understand some of the risks associated with their products.
It would be a small step in the right direction, but a step nonetheless. In our firm’s nearly thirty-year history of advocating for greater corporate responsibility, we’ve learned that small victories can result in significant improvements in the lives of real people and the quality of important ecosystems.
Jack Ucciferri is the Research and Advocacy Director and Associate Portfolio Manager for Harrington Investments, a socially responsible investment advisory firm. He currently serves on the Board of the Fund for Santa Barbara, and the Advisory Board of Project Wave of Optimism. He received an MA from the Global and International Studies Program at UCSB.
Comments
Monsanto is a terrible use of technology. There is no guarantee that GMO crops have better yields or are healthier - in fact there are studies that suggest otherwise, and the effect on soils is negative.
No corporation on earth should have a patent on seeds of any kind. People should be able to use seeds harvested from previous crops for the following year without having to buy them. Not so with GMO.
It is also possible to be "organic" without buying the alternative to GMO. I just avoid consuming soybean, corn, canola or cow's milk. Instead there is olive oil, coconut oil and goat's milk or on occasion non-GMO cow's milk.
tabatha (anonymous profile)
October 7, 2011 at 9:18 p.m. (Suggest removal)
"No corporation on earth should have a patent on seeds of any kind."
Why not? If they put the time and the money into R&D, why shouldn't they have a patent? Is it just because they're "seeds"? Does that also include flower seeds? What about bulbs?
waz (anonymous profile)
October 10, 2011 at 8:31 a.m. (Suggest removal)
waz, the reason why there shouldn't be a patent on seeds is because it is life, first and foremost, and secondly because of the problems with cross pollination. Monsanto has actually sued many small farms who never planted their seeds, but were on the receiving end of some wind drift, birds carrying their seeds or a truck who may have driven by their farm with a partly opened container. When Monsanto found out they had the courts force them to destroy decades worth of seed stock. That is a crime against humanity. Speaking of which, Monsanto has a "terminator gene" which causes the seeds of some of their crops to be sterile. What if these plants cross pollinated with local farmers who collected their seeds and much of their seeds suddenly became sterile? Again, more crimes against humanity.
Monsanto is simply a corporatist nightmare of a company who receives countless government subsidies.
loonpt (anonymous profile)
October 10, 2011 at 11:22 a.m. (Suggest removal)
The author mentions that organic food is more expensive than non-organic, but that isn't really a fair comparison. Non-organic foods receive huge amounts of government subsidies while organic foods have to go through a very expensive certification process. It's like comparing apples and oranges, so to speak. Who knows what the real prices would be without government involvement in the industry. Free markets ftw.
loonpt (anonymous profile)
October 10, 2011 at 11:25 a.m. (Suggest removal)
It amazes me how some worhip at the altar of money/capitalism. What happens when they clone humans? Who will own the patent on your DNA?
spacey (anonymous profile)
October 10, 2011 at 12:29 p.m. (Suggest removal)
loonpt-Do you know anything about farming? Anything?
Yields are generally substantially lower with organic produce. With my tomatoes this year in NorCal, 75 acres organic/100 acres non organic, my yields were about 22% per acre lower with organic despite being in adjacent fields and planted at the same time. This is typical. Further, there are ridiculous specifications around the fertilizer I can use.
There are almost ZERO extra inspections, I have not been inspected in 8 years since adding some organic acreage, so your point about certification is without merit. After the initial certification is issued there's no difference although my records must indicate what I have applied, which is no different in my case than my standard record keeping.
Some crops are almost economically impossible to grow organically because the loss in yield is not made up by an increase in wholesale price. Further, there are few organic cover crops that pay decently so when you have to rotate crops with organic you are in a real economic bind.
All of the morons that shop at Whole Foods should remember they're just a giant out of state corporation that pays the same as any other market but increases the retail price beyond the competition.
It's not about organic vs. non organic but instead "picked when ripe and expedience to the consumer" if you want flavor, as many varieties of organically grown produce are identical to their non organic counterparts, it's simply the economics described above.
italiansurg (anonymous profile)
October 11, 2011 at 6:26 a.m. (Suggest removal)
"waz, the reason why there shouldn't be a patent on seeds is because it is life, first and foremost"
- loonpt
So, if I invent something like Penicillin which is derived from Penicillium fungi, I shouldn't be allowed to have a patent on it? What about probiotic products that have "good" bacteria in them? Aren't fungi and bacteria life?
"It amazes me how some worhip at the altar of money/capitalism. What happens when they clone humans? Who will own the patent on your DNA?"
- spacey
Yeah. Let's not be more efficient when it comes to growing food. Obviously, that'll lead to human cloning. Coo Coo!
waz (anonymous profile)
October 12, 2011 at 2:21 a.m. (Suggest removal)
"No corporation on earth should have a patent on seeds of any kind."
"Why not? If they put the time and the money into R&D, why shouldn't they have a patent? Is it just because they're "seeds"? Does that also include flower seeds? What about bulbs?"
Because none of us should be comfortable with the idea of a multi-national biotech company owning food. We have a right as creatures of this planet to be able to eat.
Biotech seeds contaminate other crops. This has been proven over and over again. What happens when everything has been contaminated and is then technically owned by, say, Monsanto? Do you think this will be a good thing? He who owns the food owns the people.
JulietParker (anonymous profile)
January 12, 2012 at 1:32 p.m. (Suggest removal)
"So, if I invent something like Penicillin which is derived from Penicillium fungi, I shouldn't be allowed to have a patent on it? "
No, you shouldn't. You should be satisfied with helping your fellow man and not be a greedy SOB about it. I'm sure in this hypothetical situation you would have employment at the research lab of which you work (and invented said product) and were paid adequately there. You shouldn't desire a patent to amass wealth on the backs of the ill.
JulietParker (anonymous profile)
January 12, 2012 at 1:42 p.m. (Suggest removal)