Food price deflation through gene editing

From the beginning of 2021 to mid-2022, the price of chicken tripled, coincident with the price of corn, the primary source of chicken feed. The price of commodity corn increased from $4/bushel to $6/bushel during this period. The cause of the grain price spike was very clear — drought. Pricing for the 3 largest global animal feed crops (corn, soybeans and wheat) all inflated at this time and remained elevated through 2023 due to La Niña-driven droughts in North and South America. This trend reversed ​in 2024, with corn now back at $4/bushel, as the flip to El Niño resulted in above-average rainfall this year. Weather will always remain a key variable in agricultural markets, but gene editing, a profoundly transformative new technology, could not only moderate weather impacts with genetic drought tolerance but even more effectively accelerate yield gains. As discussed below, we see potential for increased global crop production in coming years, which could put pressure on crop prices and weaken farmer purchasing power. We would also expect this trend to devalue crop inputs like seeds, fertilizer and crop chemicals.

For the last 100 years, most crop yields have increased by less than 1%/year, driven by the very slow and random process of conventional breeding. This is abruptly changing, as seed companies can now rapidly develop high-yield seed varieties using gene editing. This technology effectively converts conventional breeding into a laboratory process, where the specifically desired variants among tens of thousands of crop genes can be selected to boost yields. While this technology has been available for 10+ years, it has been effectively banned in Europe for crops, but now the European Commission is moving toward a streamlined regulatory path for gene-edited seeds, which will enable the use of gene editing in grain-exporting countries, like the U.S. and Brazil.

Nowhere in the world is there more potential for increased crop productivity than in China. While that country has rapidly moved to the technology forefront in many end markets, agriculture represents a laggard. For example, China’s cultivated land in corn production is 35% greater than in the U.S., but yields are more than 40% lower (100 bushel/acre vs. 180 bushel/acre), resulting in China importing up to 15% of global corn shipments, the largest of any country. Not only does China have significant expertise in gene editing but the government owns the third-largest global seed company (acquired in 2017), which has been given the mandate to bolster the country’s agricultural productivity. If China’s corn yields improved to just 115 bushel/acre, still only 65% of U.S. average yields, the country would flip from being a corn importer to an exporter, which could significantly depress global corn prices. We believe this could occur in a few years.