Closed-loop systems aren’t a new idea. They’ve existed in American agricultural for generations but have been smaller scale and outside of the main cropping areas. Two macro factors have created a strong environment for closed-loop systems in commodity crops and key growing areas.
Political Barriers to Global Deregulation
Global deregulation of a GMO trait has never been more difficult. Developers have spent hundreds of millions of dollars validating the safety of their inventions, only to have governments hold up approvals with political or protectionist justifications. The latest being Mexico. A formerly reliable country for approval has now become a major barrier to commercialization of several GMO seed products. The situation has deteriorated to the point of WTO threats and lawsuits under the USMCA trade agreement. This is the clear sign that science and safety assessments no longer influence the decision-making of certain grain importers.
There is no Farmer Differentiation in Commodity-Only Systems
Commodity farmers only get paid for the weight of their grain. Improving crop composition by selecting the right varieties and agronomic practices don’t benefit the farmer unless those also produce more yield or reduce costs. This creates an environment where bigger is almost always better. Without a quality premium, reducing the cost per bushels produced is often the main driver of profitability. Even today’s high commodity prices haven’t lifted the boats. According to the USDA, only 50% of US farmers were profitable in 2022 despite the country setting its all-time export record of $194.7 billion while generating the highest gross farm income ever, more than $600 billion. Still yet, 85% of farms need off-farm income to pay bills and provide health care. The model where farmers all grow the same thing for every processor around the world means they’re under constant pressure from grain supplies on other continents, currency fluctuations, trading partner realignment and good rainfall somewhere else.
Close the Loop to Open the Future
Closed-loop production systems benefit seed developers and farmers. Developers win by avoiding the costly and time-consuming process to deregulate their innovations globally. Further, more innovations can come to market because the target acres are localized and specialized. It doesn’t need to work everywhere, just for a specific region and end-use. Outputs like more oil, more protein or nutritional qualities allow farmers to grow products that deliver real value, rather than just weight, to a processor.
Farmers win by gaining access to new seed products sooner and by having the chance to share in the value created by those improved products. Growing value-added products for specific end-users allow farmers to maintain more margin as what they grow isn’t easily replaced by larger commodity farmers or growers overseas.
This new era of closed-loop, value-added production systems will usher in more innovations from more developers, put farmers back in control of their margins and deliver much improved food and feed ingredients to processors and consumers!
