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.