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August 7, 2012

 

 

·       Winners and losers in AgraQuest deal

·       US farmland values reach record high

·       Lessons learned from Dust Bowl days

·       Growers battle virus in process tomatoes

·       USDA research history a national treasure

 

 

Winners and losers in AgraQuest deal

 

(sacbee) – If this were Silicon Valley, the story of AgraQuest Inc. would barely make a ripple.

 

In the Sacramento area, where high-tech startups struggle and big payouts are rare, what's happened to the Davis biotech company is nothing short of remarkable.

 

AgraQuest, which makes chemical-free pesticides and fungicides, agreed to be sold last month for $425 million – one of the richest takeovers the region has seen in years. The buyer is agribusiness giant Bayer CropScience.

 

AgraQuest's sale could bring more jobs, as Bayer plans to make the Davis firm the center of its green-products business. It also could inspire young firms struggling in Sacramento's often difficult entrepreneurial climate.

 

"It validates that this area can produce world-class companies," said John Callahan, a Davis biotech consultant and former AgraQuest executive.

 

AgraQuest's experience offers a rare glimpse into the drama behind a successful startup. It's the tale of a company that spent years laboring in obscurity. Only recently did eco-friendly farm pesticides break out of the niche category, bringing big bucks from Bayer.

 

"Two years ago, this deal wouldn't have been done, maybe even one year," said Pam Marrone, AgraQuest co-founder and former chief executive.

 

The company's investors made millions in the sale. But as is often the case in such stories, there were some losers, too.

 

Marrone said she and other co-founders were forced out several years ago and will get no money from the takeover. Most of the proceeds will go to a group of venture capital and private equity firms.

 

"It's bittersweet," said Marrone, 55, who has since founded another company, Marrone Bio Innovations Inc. of Davis.

 

AgraQuest Chairman John Pasquesi, whose firm Otter Capital is a major shareholder, declined to comment. AgraQuest declined to make current CEO Marcus Meadows-Smith available for an interview because the Bayer deal isn't final.

 

Officials with Bayer, a subsidiary of the German pharmaceutical conglomerate, couldn't be reached for comment.

 

But AgraQuest believes the sale will be good for its operations in Davis.

 

Bayer expects to make Davis "the center of green products for their ag-chem division," said AgraQuest spokeswoman Sarah Reiter. While she wouldn't say if AgraQuest would add jobs, she said the deal "is not going to shrink our footprint."

 

AgraQuest employs 250 workers, including 115 in Davis. The rest work at a production facility in Mexico.

 

With a shortage of venture capital and other problems, the Sacramento area has been a tough place for tech companies. But Bayer is planting its flag in a region known for agricultural science, thanks largely to UC Davis. One of Bayer's seed subsidiaries, Nunhems, has an operation in Davis.

 

"They're quite familiar with Davis, quite familiar with California agriculture," Reiter said.

 

 

Recent years turbulent

 

 

AgraQuest grew out of the early days of biotech in Davis, when companies started clustering around biotech pioneer Calgene.

 

Marrone, an insect scientist working in St. Louis, moved to Davis in 1990 to start a biotech subsidiary for Danish pharmaceutical company Novo Nordisk. Later, she and some Novo colleagues raised $500,000 and started AgraQuest.

 

Their goal: Develop a line of environmentally safe products to fight insects, fungus and other farm maladies. These biopesticides are made from ingredients such as naturally occurring bacteria.

 

AgraQuest quickly raised millions from the likes of Burrill & Co., a San Francisco biotech investor. In 2001, with markets flush, AgraQuest was about to raise $75 million through an initial public stock offering.

 

Then the market collapsed. The IPO was shelved. Other sources of funds dried up.

 

"Everybody's wallets slammed shut," Marrone said.

 

For a young company with limited revenue, it was a crisis. AgraQuest was spending heavily on product development. It was about to launch a crucial new product, a fungicide called Serenade, and Marrone was reluctant to scale back operations to conserve cash. That would have sent the wrong signal to customers.

 

So, Marrone said, she and other founders took what's known as a "cramdown." AgraQuest got new investment funds, but under terms that greatly diluted the founders' ownership.

 

"I took the money – it was good for the company; it wasn't good for me personally," Marrone said. Her stake was reduced to less than one-tenth of 1 percent, she said.

 

In 2004, she was demoted as CEO and told by investors to train her replacement, Michael Miille, a scientist and entrepreneur from the area. He was later succeeded by Meadows-Smith but remains chief operating officer.

 

Marrone, however, was gone by 2006.

 

"It happens all the time," Marrone said. "The new shareholders wanted to bring in their own people."

 

 

Biopesticides took off

 

 

It apparently worked out well for the company. More venture capital poured in. AgraQuest revenue hit $40 million last year, according to the news service MarketWatch.

 

Better yet, biopesticides were about to get hot. Practically overnight, demand exploded for environmentally friendly foods.

 

It wasn't merely the organics trend. Big supermarket chains in Europe began pushing food processors and farmers to reduce pesticide use. McDonald's, responding to shareholder groups, pressed potato growers who supply french fries to ease off on chemicals.

The capper came in 2010, when Bayer bought an Israeli biopesticide company. Bayer blended one of its traditional chemical products with one of the Israeli biopesticides and cooked up a mostly chemical-free product that shielded corn against bugs. It was an immediate hit.

 

Suddenly, AgraQuest was hot.

 

"A lot of companies are looking to broaden their pesticide business with natural products," said Sano Shimoda of BioScience Securities Inc., a Venice investment firm.

 

Besides paying $425 million, Bayer has agreed to give AgraQuest's owners "milestone payments" – additional fees as the Davis company achieves certain benchmarks.

 

But nothing for Marrone and other early founders. Although they still own slivers of the company, they'll get no money from the buyout because several big shareholders have "liquidation preferences" – a system that inflates how much of the proceeds they'll receive.

 

"Everybody's ahead of me," Marrone said.

 

It's not unique for founders to get nothing when a company is sold, especially if they surrendered almost all their equity to outside investors. That's particularly true for companies that were starved for money after the 2001 crash, said Andrew Hargardon, an expert on entrepreneurship at UC Davis.

 

Marrone said she's trying not to be too upset about it and is concentrating instead on her new company, Marrone Bio, which employs 95 workers. The company announced Friday that it's buying a manufacturing plant in Michigan.

 

"I'm focusing on this company, making it even better, learning the lessons," she said.

 

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US farmland values reach record high

 

(Bloomberg) – U.S. farmland values rose 11 percent to a record this year as crop and livestock prices surged and export demand remained high, the Department of Agriculture said.

 

The average value of all land and buildings on farms and ranches in the 48 continental states was $2,650 an acre, according to a June survey of farmers, the USDA said today in an annual report, up from a revised $2,390 a year earlier. The sample was taken before the worst drought since the 1950s spread through the Corn Belt and Great Plains, which may make investors shy away in the short term, said Brent Gloy, an agricultural economist at Purdue University in Indiana.

 

From an economic viewpoint, “one year shouldn’t have a big impact,” Gloy said in a telephone interview before the report. “From a psychological impact, people won’t be as aggressive buying land in places that didn’t have a crop.”

 

Farm income may reach $91.7 billion this year, second only to 2011, according to a USDA forecast made before the drought. Corn traded in Chicago has soared 60 percent since June 15, while soybeans climbed 24 percent and cattle gained 6.6 percent. The USDA’s next profit forecast will be at the end of this month.

 

The most expensive farmland in the U.S. was in New Jersey at $12,200 an acre, followed by Rhode Island at $12,000, according to the USDA. The cheapest land was in New Mexico and Wyoming, each at $560 an acre. The Corn Belt was the most expensive of the 10 regions tracked by the USDA, averaging $5,560 an acre after gaining 18 percent from the previous year, surpassing the Northeast, the most expensive area in 2011. The Mountain region was cheapest at $974 per acre.

 

Prices rose across the Corn Belt, the heart of this year’s drought, with values in Iowa, the largest corn, soybean and ethanol producer, rising 23 percent to $7,000 an acre. The biggest jump among regions -- 27 percent -- was in the Northern Plains, where Nebraska had a 34 percent jump, tops in the nation.

 

The Southeast was the only region where prices fell, 4.1 percent to $3,310 an acre. South Carolina had the biggest drop, at 7.9 percent to $3,500 an acre.

 

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Lessons learned from Dust Bowl days

 

(npr) – This summer's drought continues to wilt and bake crops from Ohio to the Great Plains and beyond. Under a baking, late-afternoon sun just outside of the tiny east-central Illinois town of Thawville, John Hildenbrand walks down his dusty, gravel driveway toward one of his corn fields.

 

"You can see on the outer edge, these are a lot better-looking ears on the outside rows. Of course, it's not near as hot as it is inside the field," he says.

 

Walking deeper into the 7-foot-high corn stalks, the temperature — already in the 90s — becomes stifling. Here, the ears are smaller. Peeling back the husks on an undersized ear of corn, Hildenbrand exposes kernels that are drying up.

 

"It just never really matured. And [if] we got out in there farther, it's gonna be just that much less," he says.

 

More than 63 percent of the country in the lower 48 states is experiencing drought, leading some to compare the summer of 2012 to the droughts of the 1950s and even the Dust Bowl years of the 1930s.

 

A More Resilient Corn

 

John's father, Charles Hildenbrand, was born and raised on this land and farmed these very fields for decades — as did his father before him. The 84-year-old was too young to remember much about the Dust Bowl droughts of the 1930s — other than he and his father dragged their mattresses outdoors to sleep at night.

 

But he says even though this year's drought is the worst he's ever seen, today's hybrid corn is surviving better than the corn he and his father planted ever could.

 

"If this would've been open-pollinated, it would have been all brown, probably. And there probably wouldn't be any kernels on these ears," he says. "The cobs is about all that would be there, I'm afraid."

 

The development of hybrid crops that are better able to withstand heat and drought is one of the only reasons the Hildenbrands have a chance of a small crop this year. And it's one of the most important developments in farming since those devastating droughts of yore.

 

How To Compare

 

In the '30s and '40s, Charles Hildenbrand used horses, replaced today by tractors, combines and planters with high-tech gadgets and computers. So is it even fair to compare this summer's drought to the devastating droughts in the 1950s, or even the Dust Bowl years?

 

"Certainly from a geographical footprint, it's right up there with the '50s and '30s at over 60 percent," says climatologist Mark Svoboda of the National Drought Mitigation Center at the University of Nebraska-Lincoln.

 

"But the '30s and '50s were multi-year droughts," he says, "and this drought, so far for the majority of the country, is not a multi-year drought yet."

 

In those exceptionally dry years of the 1930s, farmers and ranchers plowed up the Great Plains to plant wheat. They ended up losing not just their crops but their top soil too, as winds blew it into giant dust clouds that darkened the skies for hundreds of miles.

 

That spurred the creation of the Soil Conservation Service, which paid farmers to not farm some land and to replant the native prairie grasses to keep soil in place. Svoboda says the USDA agency also encouraged farmers to change their tillage practices.

 

"Instead of tilling the soil over, they use what they call no-till drilling or low-till ... which doesn't disturb the soil. It plants directly into a residue-covered soil that retains a lot of soil moisture in that upper part of the profile," he says.

 

In addition to being better able to preserve what little moisture is in the soil, hybrid crops send roots deeper to find moisture.

 

Praying For Rain

 

Still, University Of Illinois agronomist Emerson Nafziger says there is one constant and critical truth to farming.

 

"The hybrids and so on are improved now, but we certainly don't have hybrids that can do without water," he says.

 

Back on the Hildenbrand farm, looking over his withering crops, John Hildenbrand couldn't agree more.

 

"I was reading the CropWatchers in the Farm Bureau paper. He said, 'We're no longer crop watchers — we're deterioration watchers.' And that's really what we're doing; we're watching our crops deteriorate in front our eyes," he says.

 

Hildenbrand estimates his yields already will be less than half of normal, and if there isn't some rain and cooler temperatures soon, he may lose it all. Then he'll rely on maybe the most significant development since the 1930s in helping farmers deal with losses: crop insurance.

 

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Growers battle virus in process tomatoes

 

(AgAlert) – Sacramento Valley processing tomato growers are scrambling to manage the damage as tomato-spotted wilt virus has moved north in a big way this season.

 

Until just a few years ago, this disease was severe in the heart of the San Joaquin Valley but was largely a curiosity in the Sacramento Valley. But as growers in Merced and Fresno counties begin to get a handle on the disease, tomato growers in more northern areas are finding tomato-spotted wilt very widespread this year.

 

"This year, Yolo County seems to have the most spotted wilt of any area. We think it is because of the weedy hosts, and the fava beans in the orchards," said Bob Gilbertson, University of California Cooperative Extension specialist.

 

Gilbertson and other researchers talked with 100 growers and pest control advisors who came to a field meeting outside Woodland to discuss the increasing threat posed by tomato-spotted wilt virus in the Sacramento Valley.

 

"In 1980, I would only see tomato-spotted wilt virus every other year in the South Sacramento Valley. It was almost a curiosity. The last couple years it has been easy to see spotted wilt in many of our fields," said Gene Miyao, extension farm advisor.

 

The recent spotted wilt hot spots have been near the Yolo-Colusa county line, around Winters and north of Dixon. But there is no guarantee that one year's hot spots will be the areas hit hardest the next year.

 

"Even the high incident areas do not necessarily repeat themselves. There are new fields," Miyao said.

 

Management begins with planting resistant varieties, but it only begins there, according to Gilbertson.

 

"There are resistant varieties and they have the SW5 gene. There are more varieties with this gene. There is another gene out there called SW7. It is effective but I haven't heard of it in any commercial varieties. I imagine seed companies are trying to pyramid SW7 and SW5," Gilbertson said.

 

The resistant varieties work, and they are the most economical way to limit the damage caused by the disease, he said. But this resistance will break down in just a few years unless other steps are also taken to manage tomato-spotted wilt.

 

"If we only rely on resistance, we can break that resistance. In Florida, they say it can be broken in five years. The resistance has been broken in Florida and Europe," Gilbertson said.

 

An essential management step that is working in the San Joaquin Valley is the elimination area wide of host crops that provide a bridge for the virus between tomato crops.

 

"The Merced County growers have done a great job of eliminating the overlap of radicchio and tomatoes, and tomato-spotted wilt virus has dropped quite a bit as a result. Fresno County growers are doing a good job of disking under lettuce residue before tomatoes are planted," Gilbertson said. It is essential to get these host crops out of the ground before planting tomatoes, because the virus becomes most widespread and severe when it enters a tomato field early in the season.

 

"The key is how early the plants get the disease, which is why these bridge crops are important. The disease is most vulnerable in the winter. We're very concerned about fava beans serving as a bridge crop in this area. We believe it's these bridge crops and weedy hosts that are the source of the inoculum early in the season," Gilbertson said.

 

In addition to fava beans, a number of common weeds can also host the virus during the months between tomato crops.

 

Sunflowers, onions, alfalfa and almonds are all reported as hosts in the literature, but researchers said they are not finding tomato-spotted wilt virus in those crops in the Sacramento Valley.

 

Wheat does not host the disease, but it can be a source of thrips near tomato fields, and the next generation of these thrips can pick up and spread the disease. An infected tomato field can also serve as a reservoir of the disease for other tomato fields planted nearby.

 

"If you plant a late field next to an infected field, if it's not a resistant variety you're asking for trouble," Gilbertson said.

 

The disease is not seed-borne, but it can be brought into the field with transplants.

 

"It can get into your field with transplants, so it is very important to make sure your transplants are clean. If your transplants are infected, they will be stunted and the leaves will be necrotic," Gilbertson said. "There will probably be a few plants in a row with symptoms. This is one of the few cases we would recommend rouging."

 

A grower at the field meeting asked if it would be enough to hoe infected seedlings to spare the cost of pulling, bagging and removing them from the field.

 

"That will work," Gilbertson said.

 

Gilbertson added that the nurseries are doing a good job and relatively few infected transplants are found.

 

Early in the season, the disease causes bronzing and necrotic spots on the leaves. The fruit from infected plants is lumpy and has distinctive concentric rings.

 

"There are some relatively easy test kits that cost about $5 each that will let you know in five minutes if a plant has tomato-spotted wilt," Miyao said. Agdia in Indiana is one source for the tomato-spotted wilt virus test kits, and Envirologies also has a test kit, he said.

 

Because thrips bring the virus to tomato fields, and once it is there they spread it throughout the field, managing thrips is another key part of the control program.

 

"Tomato-spotted wilt virus is transmitted by thrips. We have been seeing much higher populations of thrips not only in California, but around the world," Gilbertson said. "If you're going to spray for thrips, it's important to do it early in the season to prevent the buildup of thrips with the disease. It is not worth it to spray for thrips in August; it is worth it to spray in April or May."

 

Materials that can be effective against thrips range from organic formulations of spinosad to organophosphates like dimethoate.

 

Yellow sticky traps are the currently recommended way to monitor for thrips early in the season but UC researchers are working on a degree-day model to simplify monitoring.

 

Most of the recent knowledge on how to manage tomato-spotted wilt has come from research financed by the state's processing tomato growers.

 

"The California Tomato Research Institute has been funding a project at UC Davis trying to look at weedy hosts, and at management practices to reduce the impact of this virus," Miyao said.

 

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USDA research history a national treasure

 

(USDA-ARS) – A century of parasite research fills at least 100 boxes at the U.S. Department of Agriculture (USDA) National Agricultural Library (NAL) in Beltsville, Md. These records include photos, drawings, lantern slides, research notes, reports, and correspondence. The documents are part of the U.S. National Animal Parasite Collection Records, which chronicle the parasitology studies of USDA scientists from1886 to 1987.

 

The parasitology records are one of the more than 200 collections that NAL holds safe, each documenting the history of a USDA program. NAL is a part of USDA's Agricultural Research Service (ARS), USDA's principal intramural scientific research agency.

 

Such records are not just the dry dust of USDA history, but a continuing resource for researchers. With access to these original materials, scientists can better understand how programs developed and why certain choices were made, explained NAL Special Collections librarian Sara B. Lee.

 

In addition, writers, historians, sociologists, conservationists, and artists regularly turn to NAL's collections as first-person sources about USDA events, programs and policies.

 

NAL even preserves the lineage of USDA buildings, especially those located along the National Mall, with a collection of photos and drawings, including an unusual photo showing the original USDA administration building and the unfinished Washington Monument taken from atop the Smithsonian Castle around 1868.

 

Perhaps the most attractive as well as historically important of NAL's treasures is the USDA Pomological Watercolor Collection, which includes 7,584 paintings, lithographs and line drawings. These technically accurate images were their day's equivalent of photo documentation of fruits, nuts and berries developed by growers or introduced by USDA around the turn of the 20th century.

 

With today's growing interest in heirloom varieties and others that are no longer commonly grown, the collection is an invaluable storehouse of fruit knowledge and history.

 

Today, NAL is making its historic collections more accessible. As funds and staffing permit, boxes of records are being more clearly indexed, and documents and images are being scanned. You can find the indexes and scanned materials on the NAL Special Collections web page by going to http://specialcollections.nal.usda.gov, and clicking on "Guide to Collections."

 

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