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Sting Operations Identify Alleged Seed Pirates

6 min read

Wheat farmer Tim Smith is as frustrated as the next guy over this year’s dismal wheat prices, but mention “seed piracy” and he gets his hackles up.

“That’s not right at all,” he said. “It’s one thing for the farmer to save seeds to plant next year, but to sell them illegally — that’s like sticking a knife in the seed company’s back.”

Smith, who grows wheat on about 900 acres in Monroe County near Holly Grove, is one of several thousand Arkansas wheat farmers, many of whom are caught up in a black-market seed controversy.

Seed piracy, or the illegal labeling and selling of proprietary crop seed, is a growing practice in Arkansas and throughout the South.

“The problem has become big enough that more large companies are going out and trying to enforce their rights,” said Mary Smith, director of the Seed Division of the Arkansas Plant Board.

Reacting to the rise in “brown-bagging” — the term used to describe illegal seed dealing — a handful of the nation’s largest farm seed producers have taken steps in Arkansas to crack down on the seed pirates.

Syngenta Seeds Inc. and Agripro Wheat recently filed more than a half-dozen lawsuits in Arkansas’ federal district courts, alleging some farmers and distributors in the Delta region are engaging in a black market for wheat seeds.

The companies say that unlicensed dealers are bootlegging bags of their federally protected seeds — selling them with fake labels and not paying royalty fees.

“I’ve been told by dealers and seedsmen all the way from here to North Carolina that anywhere from 35 to 50 percent of all of the wheat acres in the Midsouth have been planted with seeds gotten illegally,” said Duff Nolan, a Stuttgart attorney representing the seed companies.

“There’s no reason to believe the percentage of illegal seeds in Arkansas is any different.”

The farmers themselves don’t dispute those statistics. “It’s at least that much,” said David Farabough, a Lincoln County farmer and member of the Arkansas Wheat Growers Association. “It’s a very common practice, and that number seems pretty accurate.”

The issue involves crop seeds that are protected by federal patent laws and the Plant Variety Protection Act. Both sets of regulations allow companies to register their specially developed seed varieties in order to control their use, marketing and sale.

Patents carry strict rules regarding the use, sale and breeding of seeds. Generally, the only thing farmers can do with a patented seed variety is plant it and harvest the crop for sale. With patented varieties, farmers can plant the seed for one year’s crop only — they are not allowed to collect seeds from their crop to plant the following year. Also, seed breeders are not allowed to touch them for breeding purposes, and only authorized dealers can sell them.

Like patents, the PVPA protects a company’s interest in its intellectual property. In much the same way that computer users cannot legally share or reproduce software without permission from the manufacturer, farmers and seed dealers cannot sell or reproduce farm crop seeds that are registered under the PVPA. They aren’t even allowed to carry them over to a neighboring farm.

Unlike patented seeds, however, farmers are allowed to collect PVPA protected seeds from their crop to replant the following year, and breeders can use the seeds to develop new varieties.

England Stings

In a surprise sting operation this summer, Nolan’s client, Agripro, sent investigators acting as wheat buyers to the England Dryer and Elevator Co. Inc., a seed and grain distributor located 25 miles southeast of Little Rock.

“The data collection investigator purchased 10 to 20 bags of seed labeled ‘Variety Not Stated’ at England Dryer,” Nolan said. “Samples of these brown-bagged seeds were taken and sent to be DNA fingerprinted.”

The lab found they were a perfect genetic match for Agripro’s registered variety called “Shiloh.”

In its lawsuit against England Dryer, Colorado-based Agripro says it is entitled to recover all of England Dryer’s profits made from Agripro seeds it sold, as well as damages, because England Dryer is not an authorized dealer and sold the seeds without proper labeling.

“We know they sold several thousand bushels, but we won’t know the exact number until we finish reviewing their records,” Nolan said.

This year Agripro’s wheat seed sold for about $8 a bushel, Nolan said. Agripro charges its authorized dealers $1-$1.75 a bushel in royalties.

In similar cases, triple damages have been awarded to plaintiffs to deter future violations, Nolan said.

A major agricultural player in the Delta region, England Dryer was one of 16 businesses Arkansas Gov. Mike Huckabee recommended this summer to receive a grant from the Delta Regional Authority. England Dryer applied for $262,000 to put toward a new $1.2 million soybean processing plant at its England facility.

Calls to England Dryer owners Gary Canada Sr. and Ken Fisher were not returned.

England Dryer’s Little Rock attorney, Will Allison, downplayed the magnitude of the lawsuit. “It’s not a big thing. (Agripro is) simply asking about a type of seed that was sold, and we just have to go back and research where it all came from and how far back it was sold,” he said.

Others may have sold the seeds to England Dryer without disclosing that the seed was protected, Allison said. “Once we get the research resolved it will be a moot point.”

Nolan said that’s not likely.

“I have never seen a case yet where ignorance of the law was a solid defense,” he said.

“Every wheat field in the state of Arkansas is planted with a known seed variety, and I have yet to meet a farmer who could not tell you the variety of crop he has planted,” Nolan said. “England Dryer has a responsibility for knowing what they’re going to sell. They took quite a risk by putting a ‘Variety Not Stated’ label on a known variety and selling it.

“Any time you see a bag that says ‘Variety Not Stated,’ it’s a red flag.”

Similar undercover investigations were carried out by Delaware-based Syngenta Seeds Inc. at other dealerships where investigators also found brown-bagged proprietary seeds.

Again, DNA fingerprinting tests matched seeds that had been developed by Syngenta, and Nolan filed six more lawsuits in federal court. One defendant is East Arkansas Grain Co. LLC of Marianna in Lee County. Ironically, one East Arkansas Grain Co. owner is Mark Waldrip, who serves on the seed committee of the Arkansas Plant Board.

“This was as much a surprise to me as anybody,” Waldrip said. “I didn’t find out about it until after the fact.”

Larry McClendon, the business’ managing partner, did not return a call requesting comment.

Public v. Private

In Arkansas, wheat farmers grow a type of “soft” wheat used to make flour for cakes and cookies.

Arkansas farmers basically have two choices when buying wheat seeds: inexpensive and unpatented public varieties or private varieties that cost considerably more and come with patent and PVPA restrictions.

The reason privately developed seeds can support a black market is they are superior to seeds developed in the public sector, said William Johnson, University of Arkansas extension agronomist and wheat expert.

Disease resistance, pest and fungal resistance, soil adaptability and high yields are traits bred into the private company seed varieties that give them an advantage over publicly developed varieties.

But farmers pay a hefty price for superior seeds. A bushel of publicly developed seeds cost $5-$6 a bushel during this year’s wheat season, while seeds like Syngenta’s “Coker” varieties ran as high as $10 a bushel.

For farmers such as Smith and Farabough, this means investing thousands of extra dollars up front for a crop that has yet to emerge from the soil.

“With 1,000 acres in wheat, that means you’re spending $18,000 even before you know how much the selling price will be,” Smith said.

Last year was particularly hard for Arkansas wheat farmers, who saw their cash receipts from the state’s total 1 million wheat acres drop to $121.8 million from $137.5 million in 2000.

To make matters worse, wheat seed prices nearly doubled this year. “When the price went up by $4 a bag, that kind of put a bad taste in the mouths of some growers because prices seemed to have jumped without a reason,” Farabough said. “That in itself may be a temptation to go out and ‘brown bag.'”

Despite rising seed prices, history shows that farmers stand to benefit from buying high-quality varieties.

“These companies have worked hard and spent a lot of money on developing plant varieties that truly work well in our state,” Smith said. “If you ask 10 different farmers if they think the seed costs too much, 10 of them would say yes, but most of them would also say they’re willing to keep buying it to protect the technology.”

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