Sunday, April 24, 2005

Monsanto marches on

"Exponential growth, dwindling opposition--it all adds up to a windfall for Monsanto," I wrote in Bitter Greens Journal's very first post on Jan. 20.

I used the gene-splicing seed giant's blockbuster performance on Wall Street to argue that its attempted leveraged buyout of global agriculture is moving forward with nary a hitch. (The black, red, and green lines, respectively, represent the major U.S. stock indexes, trampled underfoot by Monsanto.)

Since that time, Monsanto has continued to thunder ahead of the broader market.

Here are a few recent developments.

• Monsanto continues its successful campaign in European courts to force Brazilian and Argentine soybean farmers to pay royalties for seeds. These cases illuminate the dark core of Monsanto's business model. Conventional seed companies sell farmers seeds and book a one-time profit; farmers are free to save seeds, as they have since the dawn of agriculture, for future use.

Monsanto, however, is developing a sort of software model. It sells not only seeds but also a license on the DNA contained within the seed, which it claims to own; farmers are expected to pay royalties each year for as long as the company holds a patent on the seed's DNA.

When Argentina opened its market to GM seeds in 1996, it shrewdly denied Monsanto a patent. Farmers bought Roundup Ready soy seeds (genetically engineered to withstand copious applications of Roundup, Monsanto's cash-cow weed killer) and proceeded to save them--without paying Monsanto. Meanwhile, these farmers quickly began smuggling GM seed for sale into Brazil--which only recently officially opened its doors to GM seeds.

As this Wall Street
Journal article
shows, Monsanto's strategy for shaking down Argentina's farmers is to file lawsuits in EU countries that recognize the company's soy patents and import Argentine soy. Since the company can't charge farmers royalties annually, it's demanding a 1 percent cut of the take when the nation's farmers sell their goods in Europe.

The same tactic has already been used to squeeze cash out of Brazil's soy farmers, the WSJ reports.

How critical is this tactic to Monsanto's profit prospects? The company's shares plunged 5 percent on April 4, the day after ministers from Brazil, Argentina, and Paraguay issued a joint statement deploring the export charge, the WSJ reports. With the US market rapidly maturing (see lead quote above), the company will need to squeeze cash out of rapidly emerging ag commodity-producing regions like Argentina and Brazil, investors figure.

Shares quickly recovered, however, as Wall Street analysts rallied round the company's stock.

Greenpeace, which has been helping defend Argentine farmers against these assaults, notes a sinister twist to Monsanto's strategy. The group's Emiliano Ezcurra told the Journal:

Monsanto has sold these seeds here since 1996, but it never went after farmers before because it was waiting for practically all of them to become users of Roundup Ready. Now that nearly everyone uses Roundup Ready, Monsanto is suddenly interested in collecting royalties. That is very suspicious.

It should also be noted here that Monsanto has not been shy about suing U.S. farmers who never bought Monsanto seeds, but whose crops were contaminated by Monsanto traits through cross-pollination, for non-payment of royalties. (See a recent report by the indispensable Center for Food Safety for details).

Greenpeace's Ezcurra is not sanguine about the Argentine farmers' prospects in EU courts. He added: "The most probable outcome is that Monsanto will win this case...But it's important that people in Europe be aware of Monsanto 's maneuverings in Argentina."

Surely, the whole business is sordid. By buying into the promises of GM, Argentine and Brazilian farmers are submitting to the ruinous trap of maximizing production for the global commodity market. The sort of input-heavy agriculture being practiced there is not only a poor business model for farmers, but it's also environmentally disastrous, as it depends heavily on nitrogen-rich fertilizers as well as Monsanto's Roundup.

Nevertheless, I wish those farmers well in their attempt to stiff this rogue company.

Here is an excellent WSJ article describing Monsanto's ultimately bungled attempt to bribe Indonesia's government into accepting GM seeds.

The punchline: Charles Martin, the company's main Asia hand, fired for his role in the botched bribery, now heads up the U.S. Chamber of Commerce's chapter in China, of which Monsanto is a dues-paying member.

Martin is the author of the following gem, quoted by the WSJ and revealed to investigators by an Indonesian official:

When the government plays classical music, we play classical music; when it plays jazz, we play jazz; if it plays bribery, we play bribery; but if it plays clean, that is what we like.

U.S. authorities caught Monsanto doling out a total of $750,000 in bribes to officials, for which it slapped a fine of $1.5 million on the company.

• Meanwhile, Monsanto's bottom line swells.

Earlier this month, Monsanto reported net income for first-quarter 2005 had more than doubled compared with the same period a year before, surging to $373 million from $154 million. Moreover, the company told Wall Street it expects earnings to grow 17% overall in 2006 and 20% to 25% in 2007.

The company added that those numbers assume royalty revenue from Brazil and Paraguay but not from Argentina. "We hope we can finally reach a resolution [with Argentina] that allows us to be compensated for the value our technology has brought to that country's soybean farmers," a company official declared.

And if Monsanto succeeds, I suppose it plans to use its soaring profits to help clean up the environmental and social messes its technology is creating down there.

• I'll end on a bit of hopeful news. Monsanto recently announced it had received a "a broad subpoena from Illinois officials seeking information about the pricing and licensing of its genetically modified seeds" (quote from a WSJ article).

Details remain sketchy, but lots of interesting info can be revealed when state prosecutors go after big companies, as several Wall Street firms can attest. BGJ will be watching this story.


Blogger Sally said...

Have you seen this?

[Message to Sustainable Agriculture Network Discussion Group]

News Release
May 6, 2005

Seedy Business
Ag-biotech industry seeks to prohibit local regulations in NC

Members of the North Carolina General Assembly have filed a flurry of
bills drafted by corporate agribusiness to preempt local regulations
that might restrict genetically modified crops. House Bill 671 [link
here] and its counterpart Senate Bill 631 [link here] were recently
introduced by the House and Senate Agriculture Committee Chairs, Rep.
Dewey Hill (Dem.), and Senator Charles Albertson (Dem.), with support
from the NC Department of Agriculture (NCDA). Another bill, Senate Bill
681, sponsored by Senator David Hoyle (Dem.) and Tom Apodaca (Rep.),
also proposes to prohibit local regulation of forestry and agricultural

Goodness Grows in North Carolina? HB 671 and SB 631 aim to prevent
towns, counties or cities from passing any ordinance or resolution to
control any kind of plant or plant pest. "This is a draconian measure
that would usurp local control by making the NC Department of
Agriculture the only body in North Carolina with the authority to
regulate plants," said Michael Sligh, of RAFI-USA in Pittsboro.

The bills are not a home grown initiative, but part of a nationwide
agribusiness effort. Similar bills, containing identical language, have
cropped up in at least nine other states as part of an orchestrated
campaign by industry to prevent citizen initiatives like those passed in
three California counties last year that prohibited cultivation of
genetically modified crops. "These bills represent a pledge of
allegiance to Monsanto," said Hope Shand, Research Director of ETC Group
in Carrboro, "and the North Carolina Department of Agriculture was quick
to take the pledge, followed by their friends in the General Assembly.
But what's good for Monsanto isn't necessarily what's best for local

The Plot Thickens: The issue has immediate relevance in eastern North
Carolina where Ventria Bioscience is now growing an experimental plot of
rice engineered with synthetic human genes (to produce lactoferrin and
lysozyme proteins found in mother's milk) on a farm adjacent to the NCDA
Tidewater Research Station in Plymouth (Washington County). Two earlier
attempts by Ventria to grow its genetically modified "pharma rice" -- a
crop that yields pharmaceutical proteins for use in medicines -- were
rejected by farmers, food companies and environmentalists in California
and Missouri because of concerns that the pharma rice could
cross-pollinate with conventional rice, contaminating the food chain.
In April 2005, California-based Ventria Bioscience requested a permit
from the US Department of Agriculture to grow up to 70 acres of
genetically modified "pharma rice" on two plots in eastern North Carolina.

While the bills aim squarely to preempt local restrictions of
genetically modified organisms (GMOs), the innocuous language never
mentions genetic engineering. The ambiguous text creates additional
concerns. For example, invasive plants and noxious weeds are a serious
problem across the state, threatening native ecosystems. They can also
have a huge impact on local economies, from aquatic invasives clogging
drinking water intakes to noxious weeds forcing major weed control costs
on farm and forest production. This bill would eliminate local
authority to take swift action to deal with invasive plants. The
legislation would also prevent other state agencies -- such as
Environment or Public Health -- from restricting plants in any way.

Squelching Unanswered Questions: Questions about genetically-modified
crops and trees are abundant -- whether they are economically beneficial
or harmful, whether they threaten public health, how to manage "drift"
of genetic material onto neighboring crops and native ecosystems -- all
these questions spark hot debate in the scientific and policy-making

One option for squelching this debate is to eliminate local control,
confining the discussion to an industry-friendly Department of
Agriculture. Just as the hog industry won legislation in North Carolina
to prohibit local jurisdictions from keeping out super-sized hog farms,
the Gene Giants are attempting to muzzle public debate in North Carolina
by eliminating local options for the protection of the economy and
public health -- and state officials so far seem more than willing to

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