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Interaction Between Tobacco Growers and
Biotech Firms
Bio-pharming is a unique agricultural technology in the sense
that the choice by farmers to adopt the technology will differ from
the adoption patterns seen with other biotech crops, such as BT-corn
or Roundup-Ready soybeans. Bio-pharming is not an open market commodity,
with adoption decisions based solely on farmer choice. Instead,
the technology is expected to be accessible by “invitation
only”; the opportunity to bio-pharm tobacco will likely be
made available to a limited number of farmers at the upper end of
the agricultural scale (in terms of on farm resources and tobacco
production expertise).
The nature of the partnering between tobacco growers and biotech
companies will dictate some of the effects on farmers. Contracting
and pricing is expected to be negotiated between vendors (tobacco
producers) and the contracting biotech companies. These contracts
may call for the vendor to deliver a pre-specified amount of tobacco
biomass, or they may stipulate a certain amount of tobacco acreage
to be planted to pharmaceutical-producing tobacco.
At first glance, one might expect that farmers would be willing
to contract for no less than the returns that they currently earn
when producing traditional tobacco.  This
expectation may ultimately hold true. However, there are mitigating
factors that come into play. On the one hand, growers must recognize
that processing transgenic tobacco for pharmaceuticals is more expensive
than processing tobacco for cigarettes, meaning that for equal amounts
of raw harvested traditional and bio-tobacco, bio-tobacco is expected
to have less value. On the other hand, growers may be able to take
advantage of the fact that tobacco biopharming will realize much
higher yields on a per acre basis than traditional tobacco -- because
pharmaceutical companies are not concerned about leaf quality (their
goal is simply to obtain the raw plant biomass), tobacco bio-pharming
will allow for much greater planting densities than traditional
tobacco farming.
Availability of vendors is another issue that could impact tobacco
bio-pharming contracts. On the surface, there appears to be a surplus
of tobacco growers, but only a limited number of contracting biotechnology
firms; potential competition among vendors could drive down growers’
contracting prices, possibly down to “at-cost” levels.
However, there may only be a handful of tobacco growers who have
the combination of expertise, on-farm resources, and willingness
to take on the added risk and management costs that will be needed
to successfully bio-pharm tobacco. This lack of highly qualified
vendors may afford the growers some bargaining power in terms of
contract pricing.
Farmers could also gain some bargaining power by coalescing into
organizations or cooperatives. Attempts at such banding have occurred
already -- in 1999, Virginia tobacco growers, in conjunction with
The Virginia Farm Bureau, formed a tobacco production company known
as  Tobio,
LLC. The purpose of this venture was to produce and source transgenic
biomass from tobacco; Tobio would supply biotechnology companies
with the raw transgenic tobacco material from which therapeutic
proteins could be extracted. The Tobio experience, however, suggests
that such grower collectives can be fragile -- ultimately Tobio
fell short of its capital-raising goal, and was eventually disbanded
with monies returned to investors. Timeliness of opportunity was
another factor related to Tobio’s break down. The growers
who bought shares in the collective were ready -- based on economic
necessity -- to immediately begin producing bio-tobacco. But, the
research-to-production sequence for developing tobacco-derived products
is a long, often difficult process, and lagged behind the growers’
immediate needs. As a result, the biotech companies were not ready
to contract with Tobio, and the cooperative never really got off
the ground.
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