June 1997 SOYBEAN: THE HIDDEN COMMODITY GRAIN It was not until Monsanto started exporting its genetically-engineered herbicide-tolerant soybean mixed with conventional soybean that most Europeans learnt the extent to which soybean is a "hidden" component of most processed foods. Industry sees a rosy future for its soybean investments as the bean's dramatic rise to fame and fortune continues steadily and its industrial uses become more and more diversified. As with many other crops, the soybean market is characterised by increasing consolidation of corporate control over it. Biotechnology is the key tool to the transformation of a food crop into yet another industrial commodity. The Yellow River valley is well known as the birthplace of one of the world's oldest and most complex civilisations -- China -- but less renowned as the birthplace of the soya bean. The Chinese not only domesticated the soya bean from its wild relatives, but also developed soya processing. They fermented soybeans to make tofu and wine, used it as a feed and as medicine, and developed techniques to extract its oil (21% of the bean's weight). Crushing workshops appeared after the 15th century, and the oil cake that remained after oil extraction soon replaced beans as fertilizer and feed. From China, the soybean migrated to Korea, Japan, Indonesia, the Philippines, India, Thailand and other Asian countries. As the bean moved around, local farmers developed their own processing techniques and soya varieties. According to the FAO, soya is now grown over 66 million hectares worldwide, and in 1996 global production reached 130 million metric tonnes. As the graph shows, virtually all the world's soya production comes from only five countries, with the US accounting for half of it. The staple of the Ancient Chinese is still consumed as food, but is now more widely used as a source of oil and feed. Soya bean now represents a multibillion dollar market and is an extremely valuable crop for the agrochemical industry. A Meteoric rise to Stardom The soya bean's rise to global fame started after the 1949 Chinese Revolution resulted in a collapse in the country's exports. The US immediately took the opportunity to develop domestic production. The pricing policy was set in such a way that gave processors control over the whole production process. As the farmers' newsletter Food Matters Worldwide describes: "The processors thus created a dependency on their products which they sought to increase over the next few years by a variety of means: they integrated vertically, so as to control the whole chain, right up to the final products. The companies imposed contracts on farmers, according to which they had to buy all external inputs from the same firms, ultimately causing great financial difficulties and a loss of control over their own production. This phenomenon, coupled with the fact that soya contains very high levels of the same amino acids as are found in cereals, conspired in the post-war period to create what became known as the American Soya Complex. This efficient machine took production and consumption of meat products in the USA to an all-time high". US-produced soya did not only contribute to the intensification of domestic livestock production. In 1973, when the US ordered an embargo on soya due to a poor harvest, the European Economic Community (EEC) realised how dependent it had become on US soya for feed. In response, towards the end of the 1970s the EEC set up a programme to encourage greater production and use of European-grown oil crops, such as rape seed, sunflower and soya bean. This in turn led the EU and the US into a series of disputes under the General Agreement for Trade and Tariffs (GATT), which have resulted in a limit in the production area of oilseed in the EU, while allowing it to continue to subsidise EU oilseed producers. SOYA ON THE MARKET In East and South-East Asia, soya still is an important component of the diet, in the form of milk, tofu, tempeh, miso, youba, soya sauce and bean sprouts. In many countries, like Japan, Burma, Nepal, the Philippines and Vietnam, most of the crop is destined for domestic consumption. In Indonesia, it is the most important leguminous crop and a valuable staple food. Besides its role as a staple, the soya beans are the raw material for the obtention of oil and meal. The US accounts for 73% of the world's US$7.39 billion soya bean export market. Soya oil and lecithin, a soybean derivative, are found in literally tens of thousands of processed foods, from chocolate and margarine to breakfast cereals, chips, bread, cakes and snacks. Soybean is the most important temperate oil seed, and between 1988 and 1992 it accounted for 19 % of all world export of major vegetable oils, surpassed only by oil palm (38%). Brazil and Argentina are the main exporters in the US$4 billion international market of soya oil. Soya meal accounts for 60-65% of total meal supply. Soybean is a preferred feed to cereals, since it has greater calorific value. It is used mainly for feeding poultry and swine. It is also increasingly being considered for aquacultural production, as it is much cheaper than fish meal, although currently the presence of some proteins which have an adverse effect on fish is delaying its adoption on a large scale. The main feed exporters are Brazil and Argentina, which account for nearly 54% of the US$ 5.6 billion global exports of soymeal, with the US ranked in third position. The EU is by far the largest importer of soybean and soybean meal, although it is also an important exporter. As international demand for soya grew in the 1960s, Brazil became one of the world's main producers. Soya monoculture expanded rapidly in the 1970s, which came hand in hand with massive rural exodus, land concentration and corporate control. In Rio Grande do Sul, 300,000 farms disappeared, and 1.7 million out of a total population of 8 million left the countryside. Intensification of soya production in the Cerrados region led to a rise in production from 6% to 44% of the total Brazilian soya production between 1957 and 1991. This intensification was supported financially by Japan, which was eager to reduce the monopoly of US soya production. Cerrados has become a sad tribute to the environmental degradation caused by intensive monocropping. The soya invasion has contributed to the devastation of the entire Cerrados plateau, by increasing the deforestation rate, exacerbating soil erosion, and increasing the incidence of disease and pests. But according to macroeconomic indicators that normally do not take social or environmental destruction into account, soya is a roaring success. In 1995, Brazil earned $US 3.8 billion from exports of soya protein, soya oil and soya bean. Lured by promises of even larger exports, and claiming that environmental destruction is an necessary evil of economic development, the governments of Brazil, Argentina, Paraguay, Bolivia and Uruguay have big plans for the soybean. They are collaborating, via the Hidrovia hydroelectric project, to turn the centre of Brazil, El Pantanal, into a huge soya sea, connected directly with the Southern Atlantic Ocean by channelling the Paraguay and Paraná rivers. It is not only Latin American countries that have been turning to soya. India's production increased 30-fold from 1970 to 1980, and 10-fold between 1980 and 1996. In 1995, the country exported soybean meal for US$ 336 millions. And Thailand devotes 70% of its soya harvest to oil production. Asia now imports soya bean and soya products for US$ 7 billion, with soya bean as the top commodity. But perhaps the governments of these and other Southern countries should stop listening to the mermaids' cries of instant gratification and wealth from intensive, high-tech soya monocropping and processing and take a look at what the world of soya will look like in the hands of transnational companies. They might then think twice about allowing such an important part of their economies to be left in the hands of those that are investing in soya to gain proprietary control over it. With industry at the helm of soybean production, short-term profits will be made at the expense of sustainability, diversity and accessibility to food. Diversity Pays the Price of Commercialisation Although the domestication of soybean started in the Yellow River valley, its centre of diversity spreads through China, Korea, Russia, Korea, and Taiwan, where the wild soybean still grows. Cambodia, Burma, Japan and Afghanistan are also home to a rich diversity of the crop. Cropping systems are also diverse. Most of the soya farmers in South and South-East Asia are smallholders, and grow the crop both in monoculture and in various intercropping systems with maize, cassava, sorghum, banana, sugar-cane, rubber, oil palm, coconut and fruit-trees. Soybean is also grown on paddy-rice bunds. Diverse cropping systems, the diversity of uses for the bean and the wide variety of environments and geographical regions where soya is grown led to the development of a rich diversity of soya varieties. Modern production systems, however, have led to dramatic losses in the diversity of varieties grown around the world. In the US, soybean breeding is leading to a dangerously narrow genetic base. In 1992, the ancestry of all major cultivars grown in the US could be traced to fewer than 20 introductions of soybean from China, Japan and Korea. In fact, according to the FAO, "over 25% of the genetic base of US soybeans trace back to five landrace cultivars." Somewhat belatedly, the US has negotiated with China to transfer some of its unique genetic material into US genebanks. The Brazilian soya industry started with varieties imported from the US, in a process of close collaboration between the International Soybean Programme at the University of Illinois and the Brazilian national institute for agriculture, EMBRAPA. The latter has since worked on developing domestic varieties, and was responsible for adapting soya to grow successfully in the sub-tropical environment of Cerrados. Sprouting Profits The soya industry is thriving, particularly in the US. The market is dominated by large corporations, which are becoming increasingly consolidated. As it is shown in Table 1, the top four companies currently share 41% of the US soya bean seed market. Table 1: Corporations control US soya seeds COMPANY Pioneer Hi-Bred Monsanto (Asgrow) Dekalb Novartis (Northrup King) Others MARKET SHARE 19% 10% 6% 6% 59% Source: The World's Seed Market Current development of the "soya complex" is largely under the control of biotechnology-oriented companies. The fact that the soya plant does not exhibit hybrid vigour, which means that farmers can and do save and replant their seed instead of buying it new each season, has not proved to be an impediment to investments up to now. And the industry is now finding "imaginative" ways to deal with such annoyances. THE FUTURE OF OIL PRODUCTION Soya competes with other tropical and temperate oil crops as raw material for industry. Different oil crops differ in the kinds of fatty acids they contain, which give the oils their particular qualities, such as density, solidification temperature, etc. Industry is more interested in the fatty acids than the oils themselves, and it is becoming more adept at synthetically modifying the various oils to meet its particular needs, lessening its dependence on plant products. Enzyme technologies are being used to make fatty acids synthetically. Oils are also being synthesised from vats of micro-organisms which grow on cheap substrates, such as waste products from agriculture or the food processing industry. Work is also being conducted to replace fatty acids with novel, less calorific substances from carbohydrate sources. A recent study concluded that the future of soya production will depend on the political environment surrounding trade. Imagining three scenarios -- protectionism, free trade and sustainable development -- the study predicts the technologies that would best suit investors' interests and the crops that would remain the most important for oil. Under the first two scenarios, a further increase in soya production is predicted: exported as a raw material under protectionism, and in the form of meal and oil under the free trade scenario. In the sustainable development scenario, the reduced use of agrochemicals, reduced animal production and the diversification of the vegetable oil sector would actually decrease soya production. This diversification would not only extend to production systems, but also "food processing, which would be based more on the intrinsic value of a particular vegetable oil, rather than on creating a defined end product out of the most convenient food ingredients". It is thus obvious that industry's current R&D is not precisely in line with the sustainable development scenario. SOURCE: The Impact of Biotechnology on the World Trade in Vegetable Oils: Three Scenarios for Developing Countries, P. Commandeur et al, Biotechnology and Development Monitor, No 24, September 1995. The complexity of the world vegetable oil and feed markets means that the biotechnological research being undertaken on soya and other oil crops is only one indicator of where the future of the oil industry is heading, as explained in the Box. Nevertheless, an analysis of soya R&D does yield some interesting insights into the shape of things to come. Biotech's focus: herbicides and food alchemy Patents and patent applications are good indicators of the direction in which industry is headed in its research on a particular crop. One source, the Derwent Biotechnology Abstracts, lists 130 patents or patent applications related to genetically engineered soya (or oilseed, in one case). One of the first observations that springs out is the distribution of the patents. Table 2 shows that over half are owned by only three corporations: Pioneer Hi-Bred, Monsanto and Du Pont, and the top ten patentees account for two thirds of all the patents. Table 2: Genetically engineered soya bean patents, as off March 97 COMPANY Pioneer-Hi-Bred-Int. Monsanto Du-Pont Lubrizol-Genet. Rhone-Poulenc-Agrochem. AgrEvo Zeneca Cornell-Res.Found. Nickerson-Biocem Novartis Res.Corp.Technol. Others Total PATENTS 27 23 15 4 4 3 3 2 2 2 2 43 130 % 21 18 12 3 3 2 2 2 2 2 2 33 100 Source: Derwent Biotechnology Abstracts, 1997. The bulk of the patents relate to general procedures for genetically engineering soya, an arena largely dominated by Monsanto and Pioneer Hi-Bred. The main focus of such research has been on modifying the plant's agronomic characteristics with the creation of tolerance to herbicides topping the agenda. Three quarters of the patents in this field are under the domain of Monsanto. The second most important focus of soya patents relates to the modification of its nutritional qualities, particularly the oil content. The main players in this arena are Du Pont, Monsanto and Zeneca. Pioneer Hi-Bred seems more concerned with the value of soya as feed, and leads research on modifying the protein content. But then, field tests often provide a clearer picture of the emerging market than patent applications because they relate to products further along the R&D pipeline. The US Department of Agriculture (USDA) APHIS database on permissions and notifications for field tests of genetically-engineered crops indicates that by May 8, 1997, there had been a total of 379 experimental releases of genetically-engineered soya in the US alone, accounting for a 12.6% of all field tests in the country. Only maize and tomato have been more extensively tested. Table 3: Who is Out in the Field? Soybean field tests in the USA as of May 8, 1997 COMPANY AgrEvo Du Pont Pioneer Monsanto Asgrow Agracetus Dairyland Seeds DeKalb Upjohn Novartis Others Total No. TESTS 81 77 56 48 39 32 8 8 8 6 16 379 % 21 20 15 13 10 8 2 2 2 2 4 100 Source: USDA, APHIS database, May 1997 Table 3 demonstrates the domination of a few big players in the commodification of soy bean: the top five companies account for almost 80% of all field tests. Table 4 shows what the companies are trying to achieve: herbicide tolerance has been the focus of two-thirds of all soy bean field tests in the USA. All but one of these tests have been for the two top herbicides these days: glyphosate and gluphosinate. Work on pest and disease resistance is virtually non existant, judged by the testing in the field. Table 4: What is out in the field? Soybean field tests in the USA as of May 8, 1997: Traits TRAIT Total herbicide tolerance - Glyphosate tolerance - Isoxazole tolerance - Phosphinothricine tolerance Protein Quality Oil Quality Insect resistance virus resistance Other traits Total* TESTS 234 103 1 130 43 46 3 1 35 362 % 65 12 13 1 0 10 100 *Since some plants are field tested for more than one character, the total amount of characteristics is larger than the total number of tests. Source: USDA, APHIS database, June 1997 All the field tests on soybeans with modified oil content are being carried out by Du Pont. This company is developing its "Optimum High Oleic Soybeans" with an oleic acid concentration of 80% or more, which makes the oil better for frying. Du Pont is also experimenting with protein content, by increasing the content of the essential amino acids lysine and methionine, and reducing stachyose. Pioneer Hi-Bred has also field tested high-methionine soya, using genes spliced in from Brazil nuts. Some 24 field tests had already been conducted before it was pointed out to Pioneer that the Brazil nut genes presented serious allergenicity risks and the product had to be withdrawn. Few crops have ever made as much noise on reaching the market as the first commercially-grown genetically-engineered soya bean: Monsanto's Roundup Ready. Huge controversy was created over Monsanto's refusal to label the bean as genetically-engineered and the exploitative contract farmers have to sign to cultivate them. This is particularly outrageous, since it not only prevents farmers from re-planting saved seed and to conduct any further development, but it also makes them responsible for the use that processors might give the seed, forces them to accept the inspection of their fields even without his presence for three years. In contrast, Monsanto does not commit itself to anything (for more information see "Roundup Ready or Not", in the March 1997 issue of Seedling). Despite the outcry, Roundup Ready soya beans are already being grown in the US and in Argentina and Uruguay. The Emerging Corporate Battleground Only two other genetechnology soybean products are close to the end of the US regulatory pipeline: AgrEvo's glufosinate-resistant soya and Du Pont's Optimum High Oleic Soybeans. These first genetically-engineered products seem to represent a good reflection of where industry is taking the soybean in the future: crops that resist higher dosis of agrochemicals, and fit the needs of the food and feed processing industries. Breeding for characteristics related to sustainability and feeding the world are far off the agenda. Intellectual property rights are the weapons with which the battle to control soybean is being fought. Many of the 130 patents awarded on the soybean overlap with or contradict each other and many conflicts have consequently arisen. The most controversial patent on this crop was the European Patent 301,749 granted to Agracetus, covering any genetically-engineered soya. The patent caused an uproar even amongst the biotech industry, and all the major companies involved in soybean research, including Ciba Geigy, Pioneer Hi-Bred and Monsanto, opposed it. In 1996, however, Monsanto changed its strategy: it decided to buy the whole of Agracetus, including its patent portfolio, and now defends the patent! Consolidation of soybean interests into fewer corporate portfolios continues unabated. Pioneer Hi-Bred now controls 19% of the soybean seed market in the US, and also has the most comprehensive private soybean breeding programme in the world. Monsanto has also made great strides into the seed market in order to secure continued profits from its Roundup herbicide. Its recent purchase of Asgrow Agronomics, which accounts for 10% of soya seed in the US market, and of Monsoy, a Brazilian equivalent, have considerably strengthened Monsanto's position in the soybean market. Other agrochemical giants, such as AgrEvo and Du Pont, seem more comfortable licensing their technology. Through a variety of lincensing agreements, the handful of companies that fight each other to dead in the patent courts work neatly together in the field to divide markets and maintain control. This emerging oligopoly will no doubt further consolidate in the future, and the soybean's fate will be determined by fewer and fewer corporate interests. The humble soybean will become less and less significant as a staple for human consumption, since it will be increasingly used as a raw material in the industrial production lines that create the highly-processed chemical products that are being passed off as food. As the food supply industry further consolidates, the distinction between producers and processors will become more blurry, and the few remaining food giants will continue their battles in the IPR arena to protect their interests and their market shares. Soon all the small fish will be eaten up, and who knows what the big fish will start eating then.... Main Sources: - Sun Huan and Xu Lao, "The History of Soybean in the Orient", Proc. Soybean in Asia. FAO RAPA 1993/6 - "The World of Soya: the `Hidden' Costs of Production and Trade", Food Matters Worldwide, April 1993. - Peter Commandeur et al., "Impact of Biotechnology on the World Trade in Vegetable Oils", Biotechnology and Development Monitor,No 23 and 24, June 95 and September 95. - FAO AGROSTAT database. - PROSEA summary on Glycine max (L) Merr. - OECD, 1993. Traditional Crop Breeding Practices: an Historical Review to Serve as a Baseline for Assessing the Role of Modern Biotechnology, OECD, Paris. - Derwent Biotechnology Abstracts: CD Rom, Derwent Information Limited, 1997. - Brenner C, 1993. Technology and Developing Country Agriculture: The Impact of Economic Reform. OECD, Paris.