Monsanto's fortunes turn sour
2.Signs of a biotech backlash? - Christian Science Monitor
NOTE: Reality's biting for Monsanto. John Gilbert, an Iowa farmer tells the Christian Science Monitor about GM crop uptake: "A lot of it, to be perfectly honest, is herd mentality. They believe Monsanto when they say it's going to yield more." But scepticism has begun to set in, with the Christian Science Monitor noting that a common criticism now being leveled at GM firms like Monsanto is that crop yield increases have largely been the result of advances in conventional breeding, but that those features are only being made available in strains sold with genetically-modified traits as well.
1.Monsanto's Fortunes Turn Sour
The New York Times, 4 October 2010
As recently as late December, Monsanto was named "company of the year" by Forbes magazine. Last week, the company earned a different accolade from Jim Cramer, the television stock market commentator. "This may be the worst stock of 2010," he proclaimed.
Monsanto, the giant of agricultural biotechnology, has been buffeted by setbacks this year that have prompted analysts to question whether its winning streak from creating ever more expensive genetically engineered crops is coming to an end.
The company’s stock, which rose steadily over several years to peak at around $145 a share in mid-2008, closed Monday at $47.77, having fallen about 42 percent since the beginning of the year. Its earnings for the fiscal year that ended in August, which will be announced Wednesday, are expected to be well below projections made at the beginning of the year, and the company has abandoned its profit goal for 2012 as well.
The latest blow came last week, when early returns from this year’s harvest showed that Monsanto’s newest product, SmartStax corn, which contains an unprecedented eight inserted genes, was providing yields no higher than the company’s less expensive corn that contains only three foreign genes.
Monsanto has already been forced to sharply cut prices on SmartStax and on its newest soybean seeds, called Roundup Ready 2 Yield, as sales fell below projections.
But there is more. Sales of Monsanto’s Roundup, the widely used herbicide, has collapsed this year under an onslaught of low-priced generics made in China. Weeds are growing resistant to Roundup, dampening the future of the entire Roundup Ready crop franchise. And the Justice Department is investigating Monsanto for possible antitrust violations.
Until now, Monsanto’s main challenge has come from opponents of genetically modified crops, who have slowed their adoption in Europe and some other regions. Now, however, the outspoken critics also include farmers and investors who were once in Monsanto’s camp.
“My personal view is that they overplayed their hand,” William R. Young, managing director of ChemSpeak and a consultant to investors in the chemical industry, said of Monsanto. “They are going to have to demonstrate to the farmer the advantage of their products.”
Brett D. Begemann, Monsanto’s executive vice president for seeds and traits, said the setbacks were not reflective of systemic management problems and that the company was already moving to deal with them.
“Farmers clearly gave us some feedback that we have made adjustments from,” he said in an interview Monday.
Mr. Begemann said that Monsanto used to introduce new seeds at a price that gave farmers two thirds and Monsanto one third of the extra profits that would come from higher yields or lower pest-control costs. But with SmartStax corn and Roundup Ready 2 soybeans, the company’s pricing aimed for a 50-50 split.
That backfired as American farmers grew only 6 million acres of Roundup Ready 2 soybeans this year, below the company’s goal of 8 million to 10 million acres, and only 3 million acres of SmartStax corn, below the goal of 4 million.
So now Monsanto is moving back to the older arrangement. SmartStax seed for planting next year will be priced at about only $8 an acre more than other seeds, down from about a $24 premium for this year’s seeds, Mr. Begemann said. The company will also offer credits for free seed to farmers who planted SmartStax this year and were disappointed.
Monsanto has also moved to offer farmers more varieties with fewer inserted genes. Some farmers have said they often have to buy traits they do notneed ”” such as protection from the corn rootworm in regions where that pest is not a problem ”” in order to get the best varieties. This issue has surfaced in the antitrust investigation.
Monsanto’s arch rival, DuPont’s Pioneer Hi-Bred, has also capitalized on the limited variety under a campaign called “right product, right acre.”
“If they don’t have a need for rootworm then we won’t have that trait in that product,” Paul E. Schickler, the president of Pioneer, said in an interview.
After years of rapidly losing market share in corn seeds to Monsanto, Pioneer says it has gained back 4 percentage points in the last two years, to 34 percent. Monsanto puts its market share at 36 percent in 2009 and says it has remained flat this year. In soybeans, Pioneer puts its share at 31 percent, up 7 percent over the last two years; Monsanto puts its share at 28 percent last year and said it has dropped some this year.
Monsanto had a similar problem with lower-than-expected yields on Roundup Ready 2 soybeans last year, when the crop was first planted commercially, forcing it to slash the premium it charges.
But this year, the yield appears to be meeting expectations, according to OTR Global, a market research firm that surveys farmers and seed dealers. That could bode well for SmartStax next year.
One reason is that the Roundup Ready 2 gene is now offered in more varieties, making it better suited to more growing conditions. The yield of a crop is mainly determined by the seed’s intrinsic properties, not the inserted genes. An insect protection gene will not make a poor variety a high yielder any more than spiffy shoes will turn a slow runner into Usain Bolt. In the first year of a new product, few varieties contain the new gene.
Still, Mosanto is bound at some point to face diminishing returns from its strategy of putting more and more insect-resistance and herbicide-resistance genes into the same crop, at ever increasing prices. Growth might have to eventually come from new traits, such as a drought-tolerant corn the company hopes to introduce in 2012.
“Technologically, they are still the market leader,” said Laurence Alexander, an analyst at Jefferies & Company. “The main issue going forward is do they get paid for the technology they deliver. The jury is still out on that one. It’s going to take a year or two of data to reassure people."
2.Signs of a biotech backlash?
Richard Mertens, / Correspondent
Christian Science Monitor, October 4 2010
*Genetically modified seeds are still popular, but farmers question the high costs and the rise of herbicide-resistant weeds.
Esmond, Ill. - On the eve of planting, Paul Taylor, a corn-and-soybean farmer in north central Illinois, made a quick decision.
The signs were auspicious: The sun was shining, the air was warm, the fields were dry. So he returned the 50-pound bags of expensive, genetically modified seed corn that were waiting in his shed and planted instead ordinary hybrid seeds, the kind his grandfather might have sown. An early start and lower seed costs could pay off at harvesttime.
"I'm going to roll the dice on it," he said after planting.
Even as most farmers embrace genetically modified crops, some producers are casting a critical eye on the technology. Corn Belt farmers complain loudly about the soaring cost of seed. The federal government is investigating the industry for anticompetitive practices. Farmers are grappling increasingly with weeds that have grown resistant to Roundup, an herbicide widely used with genetically modified crops, and genetic contamination of conventional crops.
"If you've got your conventional seed right next to your neighbor's [biotech] seeds, the pollen flies," says John Schmitt, a corn-and-soybean farmer in Quincy, Ill., who had to sell a third of his conventional corn at lower prices last year because of contamination. "It's nature."
Even the US Supreme Court has gotten involved, lifting an injunction against the planting of genetically modified alfalfa.
There's little evidence so far that farmers have turned against genetically modified crops. The most popular trait, tolerance to Roundup, allows them to kill weeds easily without harming their crop. Other genes enable crops like corn essentially to manufacture their own insecticide. This saves farmers the trouble and expense of applying insecticide to their fields when a problem arises.
But a rising number of farmers are raising questions about the technology, if only because they resent the rising costs. Last year the price of corn seed rose 32 percent; soybean seeds went up 24 percent.
"There just isn't competition out there," says Craig Griffieon, a farmer in Ankeny, Iowa, who shuns biotech crops.
The US Justice Department is looking into complaints of anticompetitive practices in the seed business, where seed giants like Monsanto have raised prices, bought up or pushed aside smaller seed companies, and emphasized genetic engineering over traditional plant breeding.
Most farmers grumbled but stuck to biotech seeds anyway, though many refused to buy the latest and most expensive version that Monsanto was pushing.
"A lot of it, to be perfectly honest, is herd mentality," says John Gilbert, a farmer in Iowa Falls, Iowa, who regularly plants conventional seeds. "They believe Monsanto when they say it's going to yield more."
Still, the rapid increase in the percentage of US farm acres planted with biotech crops has slowed. It rose only 1 percent last year, from 85 percent to 86 percent, the smallest increase since 2001. In Illinois, the percentage of acres planted with biotech corn dropped from 84 percent to 82 percent; biotech soybeans fell from 90 percent to 89 percent.
"The technology has really been hyped a lot," says Doug Gurian-Sherman, author of a 2009 study for the Union of Concerned Scientists that concluded that yield increases have come almost entirely from traditional plant breeding. "Even on a shoestring, conventional breeding way outperforms genetic engineering."
Monsanto doesn't dispute that much of the increase in yields is due to conventional plant breeding. But biotech traits have helped "by protecting yields that would have otherwise been lost due to insects and weeds," says Monsanto spokeswoman Mimi Ricketts.
Even if conventional seeds can produce as well as biotech seed, farmers are finding it harder to find them. That's because most crop improvements produced by traditional plant breeding are sold to farmers only in combination with biotech traits.
Probably a graver challenge is the spread of herbicide-resistant weeds. The problem is worst in Southern cotton fields, where thousands of acres are infested. But resistant weeds like horsetail and giant ragweed are now appearing across the Midwest, too.
Experts say farmers created the problem by relying too heavily on Roundup and the biotech crops that Monsanto developed to use with Roundup.
"The first seven or eight years it was the greatest thing since sliced bread," says Bill Johnson, a weed specialist at Purdue University, who called Roundup "arguably the most rapidly adopted agricultural innovation ever." Now, he says, "We're going to see the value of it erode over time."
Next year Monsanto says it plans to offer farmers more seed options and lower prices for those who want to try out its latest varieties. As for Mr. Taylor, his spring gamble to plant ordinary hybrid corn seemed to be paying off. "We won't know till harvest," he says. "But it doesn't look like a bad decision."