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November 17, 2000

The Biotech Revolution

Farmers, suppliers continue to adjust

By Lana Robinson
Field Editor

Farmers and ranchers are not the only ones making adjustments in their operations with the emergence of biotechnology. According to a panel of agriculture seed and chemical suppliers speaking to industry leaders, agricultural producers and others attending the third annual Biotechnology Conference in Lubbock earlier this month, biotechnology is presenting challenges and opportunities for that segment as well.

Rick Schmidt, manager of Helena Chemical in El Campo, a business serving rice, cotton, soybean, corn, grain sorghum, pasture, and turf-grass producers in 13 South Texas counties, said the impacts of biotechnology were slow at the start, but have begun to increase over the past two years. Schmidt said 19 percent of retail sales and 3 percent of wholesale sales for the 2000 crop year in his region were Bollgard or the "stacked gene" (Bollgard plus Roundup Ready) cotton varieties.

"It was slow to catch on here because of commodity prices. Farmers were into saving money versus making money. They have been cutting input expenses. Sixty percent of our crops are still conventional, and 40 percent have something to do with biotech—that's Monsanto figures," said Schmidt. "Another reason it's been slow in the coastal area is that some of the varieties don't fit. We are looking forward to Clearfield rice and LibertyLink rice and Roundup Ready as they come. Biotech corn will grow very slowly here."

Schmidt suggested that biotechnology allows producers a certain amount of peace of mind, freeing them to concentrate on other points of their crop.

"We will continue to position ourselves in a way that we will be able to encourage and embrace the technology," he added.

Larry Beseda, owner of Beseda Farm Supply, a full-service retailer located 45 miles west of Lubbock at Whiteface, serves producers in an area that is 50 percent irrigated, 50 percent dryland. About 95 percent of Beseda's customers are cotton producers. A few grow peanuts and, on occasion, grain sorghum. In 1998, Beseda said some local farmers tried corn and regretted it.

"The biggest thing for us is that biotechnology has increased our sales volume as far as dollars go. I think we're living in some exciting times. It's one of the things that will keep us in business, if we're going to continue competing in world markets. There are countries that can raise cotton for 55 cents a pound and make money. We're going to have to live with it.

"One of the things that comes along with the biotech is trying to educate our customer," Beseda continued. "That is becoming a big area of our business. Some producers are going all Roundup Ready. That is well and good, but if they're not up to managing it all in Roundup Ready, they don't need to be paying the extra cost associated with it. We are very diligent in the way that we recommend things, to keep the farmer in mind. He's the one that's going to keep us in business."

Keith Stephens, area manager for Agro Distribution in Ropesville, said Agro has 10 retail locations and 23 sales people, covering an area from Lubbock south and west to El Paso into New Mexico. The major crop is cotton, followed by peanuts. Vegetables, such as chiles and lettuce, are also grown in pockets across far West Texas, he said.

"In the area that I cover, biotechnology is primarily affecting the cotton industry. We saw the shift start in a large way three years ago. Seed sales jumped tremendously. The `brown bag' seed industry around Lubbock has essentially dried up. The gin used to sell the farmer seed. They'd carry it (credit) 'til fall. Now, instead of a $10 bag of seed, you're looking at $70," Stephens pointed out.

With the expansion of dryland acres, Stephens believes genetically-altered cottons will increase.

"Dryland people are beginning to figure out that Roundup Ready fits their program. Economics are a problem, but they've got to live with it. The next farm program is scheduled to reduce payments to the grower by 20 percent. That directly affects us as retailers and wholesalers. If our customer is not doing well, we're not doing well either. We have to have our customers' best interest at the forefront all the time. We have to help them reduce expenses and improve yields, and that can be done through biotechnology," he said.

Biotechnology has substantially reduced chemical sales in the Brazos Bottom over the past four years, where before the emergence of biotechnology, cotton farmers were fighting pests all season long.

"In our particular market, pre-1996—before the Bt gene in cotton—it was not unusual for some of our local growers to spray eight to 14 times to control bollworm in cotton. It was a dramatic difference in what we're now doing to survive with biotechnology," said Clay Petrus, manager of UAP Southwest in Bryan. "Granted, if biotechnology had not come along, a lot of those farmers would not have stayed in business. Now, 85 percent of the cotton grown here is some form of Bt. The big shift this year is that farmers are going to the stacked gene with Roundup Ready and Bt together."

In addition to high-input cotton, the region's farmers rotate to corn, milo and soybeans. Petrus said 95 percent of soybean varieties grown around Bryan are Roundup Ready tolerant while only a very small percentage—5-10 percent or less—of the corn crop is transgenic.

Petrus said the shift to biotechnology has really affected his "pre-emerge" business. He noted that growers in the Brazos Bottom didn't put anything down this year. He looks for some of that business to come back if the region has a wet spring.

"We sell fertilizer and offer custom application services. We have also started handling animal health products. We are surrounded by large ranch and pasture country and look forward to growing and diversifying our business and trying to adapt," he said.

Jerry Bellar, owner of Ag Supply, a full-service supply company at Earth, in the Texas Panhandle, specializes in cotton, corn and wheat, and air and ground chemical applications. Ag Supply has six Certified Crop Advisors (CCAs) on staff.

"We're in a transition period. In addition to biotechnology, there is a lot of concern about how the Internet is affecting us. I think there is still a market for customer service. Our water seems to be falling off. We've gone from a 60/40 corn and cotton mix to 80/20. We're losing corn acres. Roundup Ready and conservation till have become a big deal, but there's not enough equipment available. People look for ways to reduce their costs. We have treated cotton as a secondary crop in the past. Now that it's our main source of income, we've started looking at ways to grow cotton and be competitive in a world market, to reduce our cost per unit of production. Sometimes when we try to reduce the cost per acre, we lose sight of the cost per production unit. In this economic environment, we're not going to save ourself out of this economy. We're going to have to produce ourself out of it," said Bellar. "Conservation tillage has such an important place in the future. Water is one of the most limiting factors we have today. Conservation till is not only a way to reduce input costs, but a way to conserve water."

Benefits to consumer

Beseda noted the benefits of Roundup Ready, combined with the no-till and broadcast methods, offers a tremendous benefit to farmers in terms of conserving water and time.

Jerry Bellar cited reduced labor costs as a grower benefit.

"When you put a whole crew in the field, it doesn't take long before you can buy a gallon of Roundup. It allows growers to go into fields they couldn't control weed species in. It allows them to reduce costs. Those are positive things," he said.

One dilemma cited by an audience participant from Lamesa was that biotechnology is taking hold of producers, outstripping their ability to deal with it in the field. Bellar agreed.

"You can't own enough equipment to cover the ground," he suggested. "We are encouraging our producers to have their own equipment, but at best we can just fill in the gaps. There is such a short window in the technology. We have a lot of equipment. People are getting their own tool bars and spray rigs. We went from one shielded sprayer three years ago to 36 this year. Another thing is we have got to teach farmers some drift control or it's going to be an all-out war. We have farmers growing some conventional cotton around Roundup Ready cotton..."

Another member of the audience posed the question, "Why not just plant a conventional cotton and use a hooded sprayer?" Keith Stephens responded in this manner:

"A sprayer operates at 5 miles an hour, 1,500 pounds of pressure. The temptation is to kick it up to 20 miles per hour and 2,500 pounds of pressure. If you get any Roundup on that conventional cotton, you've got problems.

“As a retailer, I’d be very reluctant to suggest the conventional cotton and hooded sprayer. The grower’s going to come talk to me when he gets Roundup on that cotton, so you’re placing yourself in a real liability situation with your customer. In small areas, small acreage, with a weed problem, if the farmer does it himself and is real careful, it could work. But it’s very risky.”

Rick Schmidt also said there was an increased potential for problems for those with farm employees.

“The quality of labor is not there. If the farmer doesn’t lay out exactly what the employee is to do, he can make some real mistakes,” warned Schmidt.

Beseda said some growers feel like they’re buying an insurance policy with Roundup Ready resistant varieties.

“They’re willing to pay some extra for that, and they just spray a little bit. With the Roundup Ready, you’re going to ding it a little bit, but the program used rightly will more than pay for the product,” he said.

Biotech: Changes for 2001
What's in store with biotechnology for Texas producers and suppliers for the new year? Jerry Bellar said Ag Supply is positioning itself to be a "knowledge center" for farmers.

"Information is going to be the biggest way our business is going to change next year. The reason we're here is because of our producers. The producer is tied up with the production end. We've got to filter through all this technology and information and get those things most agronomically and economically sound for him—don't just use him as a guinea pig for everything that comes along. We will have more consultants on staff," he said.

Larry Beseda of Beseda Farm Supply said a willingness to change and to explore new ideas is his goal for the 2001 crop year.

"We are trying to decipher from some of that what we think is important or will work and then pass that along to our customers. We farm, also, and try to experiment with the different things that come along. We put in a half circle with the Bt and a half circle with the same variety, only with the Roundup Ready gene, for a side-by-side look. It looks like there's a tremendous difference in the yield. Again, I think the biggest change is in trying to be open and look at different things as we move forward," the farm supply retailer suggested.

Keith Stephens, Agro Distribution, said his focus for 2001 is going to be cost-savings in his own operation, which can be passed along to his customers.

"We used to think Egypt was our competitor. Now, the northern Panhandle is going to be our competitor. We're constantly fine-tuning the business to make sure we're operating efficiently. Knowledge is very important. I constantly remind my people that there has got to be a reason for our customer to want us to be on their place—other than just being a good old guy. There's a point where you can't sell it any cheaper, but we constantly work with sales people, to try to keep them on the cutting edge. All our people are CCA certified," Stephens advised.

Rick Schmidt of Helena said his main concern for 2001 is the availability of seed for his producer-customers.

"At the end of every year, we comprise a list of varieties we think will do best. We try to procure that seed and have it available. Also, we plan to go out and re-license everybody in 2001," he said.

Clay Petrus, UAP Southwest, believes industry consolidation will continue in 2001 and beyond and is adjusting accordingly.

"A lot of basic manufacturing reps that have been calling on customers won't be calling anymore. We believe that we need to ramp up our technical expertise. When we are the one making the call, we will have the answers," he said. "Our survival is going to depend a lot on how technically adept we are in the future. We're seeing this business change so dramatically. The Internet has brought in new competition from an area that hasn't been there before. We are going to need to adapt to some of the future communication that's out there. We do pride ourselves on service, but we also realize there are tools out there that can help us all."