The Dynamics of Biotechnology in the Soybean Marketplace

Based upon market behavior since the mid-1990s, the track record of producer adoption of biotechnologyenhanced soybeans is clear and consistent. Where regulations allow, producers will plant soybean seeds that have been enhanced through biotechnology. Introduced only in 1996, herbicide-tolerant soybeans were planted on 81% of US soybean acres in 2003 (United States Department of Agriculture [USDA], 2003). That adoption level is spread fairly uniformly across the major soybean-producing states. The states with the lowest adoption levels (North Dakota and Ohio) still have three out of four acres planted to herbicide tolerant varieties (USDA, 2003). South Dakota has the highest adoption rate of 91% (USDA, 2003). In Argentina, the adoption of herbicide-tolerant soybeans has been equally widespread. Indeed, data from the International Service for the Acquisition of Agribiotech Applications show that in 2002, herbicide-tolerant soybeans were planted on more than 36 million hectares globally, accounting for more than 60% of the total acreage planted to biotechnology-enhanced crops. Even in Brazil, it is believed that the acreage of herbicide tolerant soybeans planted in recent years exceeded 15% of the total acreage (Pew Initiative on Food and Agriculture, 2000; Animal Biotechnology, 2003). This occurred even though, at that time, regulations officially prohibited the planting of seeds using this technology. The goal of this paper is to explore market system dynamics associated with recent and potential future of adoption of biotechnology in the soybean marketplace. The paper’s next section discusses the economic effects in the soybean marketplace based upon experience to date. The analysis first will consider conceptually how the effects of such an innovation should impact upon the market, and then data on actual effects will be evaluated. The remainder of the paper explores likely market structure effects associated with the potential for second-generation, or output-enhancing, traits. The dynamics of change in commodity markets are investigated through the application of system dynamics. Then, a range of market channel options, from commodity to vertical integration, is assessed relative to differing uses for soybeans with output-enhanced traits.