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A weed killer is a block to build on

August 2
New York Times

Monsanto jumped headfirst into the future five years ago, when it spun off its old-line chemicals business and rechristened itself a "life sciences" company that used biotechnology to develop genetically altered crops.

After investing billions in that vision — some of it to create bioengineered corn, soybeans and other crops, and some to buy large seed companies — Monsanto is prospering. But not because of any proliferation of genetically modified supercrops, which have been widely accepted in the United States but have come under fire in Europe and Japan.

What keeps Monsanto healthy is Roundup, a chemical herbicide developed more than two decades ago. It is the best- selling agricultural chemical product ever, with $2.8 billion in sales last year; it outsells other chemicals five to one.

The growth of Roundup, which accounts for about half of Monsanto's revenue, is the primary reason that the company reported a solid profit in the second quarter, despite the resistance overseas to bioengineered crops and a depressed agriculture economy that has battered other companies.

Monsanto has maintained and even souped up Roundup's status by forging what analysts say was a brilliant strategy of dropping its price years ahead of patent expiration and tying its use to the early growth of genetically modified crops — crops made to work in tandem with the herbicide.

"It was a classic pricing strategy," said Leslie Ravitz, an analyst at Morgan Stanley. "It was a textbook case. Every 1 percent price drop led to a 2.5 or 3 percent increase in volume."

Monsanto still faces challenges. Roundup's lower price and global dominance mean that it faces difficult growth prospects. And if consumers and regulators here and abroad reject biotech crops, Monsanto and its multibillion-dollar investments would be devastated.

But analysts say the company seems to be positioning Roundup as a hedge against that possibility. And if biotechnology is not dealt a significant blow, Monsanto could become the world's most profitable agriculture company because it would then command 80 percent to 90 percent of its two primary markets — nonselective herbicides and biotechnology seeds. The combination, analysts say, could lead both product lines to reinforce each other, helping Monsanto's seeds dominate certain crops in the same way Roundup does in herbicides.

Even competitors marvel at the growth and size of Roundup. "This is a blockbuster in an industry where a blockbuster is a $200 million product," said Jerome Peribere, vice president for herbicides at Dow AgroSciences. "In pharmaceuticals, a blockbuster is $1 billion; this is like imagining a $10 to $15 billion product."

That is why analysts project double-digit growth for Monsanto over the next few years. It would be a remarkable turnaround for a company whose profits had been weighed down by huge research costs and by the debt that came with buying seed companies in the 1990's. That debt, about $6 billion, helped push Monsanto into a merger with the Pharmacia Corporation in 1999.

Pharmacia swallowed up Monsanto's drug unit, Searle, and its Celebrex arthritis drug — then spun off Monsanto as a separate company after investors complained that Monsanto would weigh down Pharmacia's profits. But since Monsanto's initial offering in October, its shares have jumped about 82 percent. Shares of Pharmacia, which still owns 85 percent of Monsanto, have fallen about 19 percent.

Investors have reacted to two trends: the company's biotechnology seeds are now planted on about 80 million acres worldwide. And Roundup commands 80 percent of the world market in herbicides that do not target specific weeds.

Even more, few competitors are willing to produce a generic version of Roundup, a glyphosate herbicide that kills just about anything green, because Monsanto has protected its market dominance by cutting the price while finding new uses. This built loyalty while reducing the profit that potential competitors could reap by trying to lure away customers.

For example, in 1996 Monsanto began marketing genetically modified crops that were immune to Roundup. The crops, called "Roundup Ready," allow farmers to spray the herbicide on the fields, killing weeds but not the crops.

The company also lowered the retail price of Roundup years before its patent expired in 2000 — dropping it from about $44 a gallon in 1997 to $34 in 1999 to about $28 today. This drove up demand and may have also deterred competitors. At the same time, profits did not suffer; volume gains made up for the price cuts.

"If you look at the period 1994 to 2000, the price decreased 45 percent but our gross profit was up 90 percent," said Hugh Grant, the chief operating officer at Monsanto, which is based here.

Roundup also helped speed the adoption of conservation tillage, a system where farmers do not weed and till the soil before planting; they simply spray weed killer and then plant. Con-till, as it is known, reduces soil erosion, saves fuel and eases wear and tear on farm equipment, not to mention lowering labor costs.

The tillage method is used on about 300 million acres worldwide, and Roundup is used on about two-thirds of those acres.

Monsanto also decided that once its United States patent expired, it would supply its glyphosate molecule to competitors. The drop in the price of Roundup and the size of Monsanto's volume — it produces close to 160 million gallons a year — seemed to deter competitors from building plants because the economics make it difficult to compete.

"They said, `We'll license you the molecule, and you can buy it, repackage it, do whatever you want. Or you can build your own plant.' " said Jeffrey Peck, an analyst at Bear Stearns. "Just about every company they offered it to took the deal."

Monsanto extended its advantage by sharing its regulatory clearances with companies that buy the ingredient from Monsanto rather than make it themselves. That sped up government approval.

The world's biggest agricultural seed and chemical company, Syngenta, which was formed last year when Novartis and AstraZeneca combined their agrochemical businesses, has begun to make a glyphosate molecule, but its market share is small. Another competitor, Dow AgroSciences, has set the modest goal of being No. 2 in the market, with 10 percent of glyphosate sales.

Some companies are fighting Monsanto in court. The DuPont Company has filed two lawsuits in federal courts accusing Monsanto of violating antitrust laws by linking the sale of Roundup and Roundup Ready crops and by using incentives and requirements to lock out rivals.

"The pressure Monsanto puts on dealers and distributors makes it very difficult for competitors to sell their own glyphosate products, even when those products are cheaper than Roundup," said John Hinderaker, a lawyer who represents Dupont. A spokesman for Monsanto said the Dupont case is "absolutely without merit."

In any case, analysts said it would be hard to compete with Monsanto on price because it could always cut the cost of the herbicide and make up the difference by raising prices for Roundup Ready seeds. Such seeds, which are protected by patents, account for almost 70 percent of the 70 million soybean acres in the United States.

"They take a lot of the price out of the herbicide but probably put it in the seed," said Ian Heap, who heads the International Survey of Herbicide Resistant Weeds in Corvallis, Ore. "And that gets a lot of companies out of the herbicide market."

The question is whether such strategies will continue to pay off. Analysts are betting yes, but there are obstacles. Adoption of the con-till method could slow. And Roundup could be nearing a saturation point — or at least a point where sizable growth is difficult, analysts say.

Industry executives agree. "The problem with Monsanto today is volumes have grown tremendously because of price elasticity, but this growth is coming down," said Mr. Peribere at Dow AgroSciences. "One has to ask whether the horse is out of the barn."

Still, analysts say Monsanto looks substantially better than it did two years ago. The company was reincarnated with a better balance sheet after the Pharmacia spinoff. It sold divisions, cut costs and trimmed its biotechnology ambitions.

Instead of trying to develop biotech versions of a dozen or more crops, it has focused on four: corn, soybeans, wheat and cotton.

Monsanto is pumping about $600 million a year in research and development, far more than any rival. The company knows that Roundup is its past, and perhaps its present. But it is counting on biotech to be the profit generator of the future.

Though costly to research and bring to market, biotech seeds generate large profits once they are licensed. This year, Monsanto is expected to bring in about $400 million from its biotech traits — the technology implanted in seeds to make a plant release an insecticide or resist weed killer.

But do not underestimate the power of Roundup, analysts say. "As the price of Roundup goes down, it's going to open up even more markets," said Andrew Cash, an analyst at UBS Warburg. "Roundup is a blockbuster right now, and it'll get even bigger."

Bioengineered food sows ethical concerns

August 2
New York Times

Whether it's the result of global protesters, well-publicized mistakes slipping into the food chain, or a sudden awareness of the speed with which bioengineered foods are filling the supermarkets, Americans' support for genetically modified foods is eroding.

Although the biotechnology industry has mounted an advertising campaign and points out that no evidence exists that anyone has been harmed by bioengineered foods, unease seems to be spreading over safety, potential environmental impacts, and concerns that freedom of choice are being undermined.

Several polls capture the shifting mood. A June survey of adults nationwide by ABCNews.com found 52 percent saying such foods are "not safe to eat," and only 35 percent expressing confidence. One year earlier, a Gallup poll had found the reverse, with 51 percent seeing no health hazard. The ABC poll also found that 93 percent wanted the federal government to mandate the labeling of genetically modified (GM) foods.

For many, ethical issues are as important as safety concerns, and last week The Pew Initiative on Food and Biotechnology released a nationwide survey of attitudes based on religious faith.

While the majority of Protestants, Catholics, Jews, and Muslims surveyed believe that "humans have been empowered by God to use such knowledge to improve human life," only among Jews did a majority favor moving genes from one organism or species to another (see below).

In a Pew-sponsored panel discussion July 26, religious leaders and ethicists identified concerns about potential harm to nature, and issues of freedom and control posed by the way GM foods have been introduced.

Are there ethical questions raised by modifying salmon to grow three to five times faster? Or modifying cats so they don't produce a protein that makes humans allergic to them? The use for which a change is made does matter morally, the panel agreed, and it calls for risk-benefit analysis, said Rabbi Avram Reiser of Baltimore Hebrew University.

They weren't impressed with the case for the cat, which would be pursued for human convenience. It's a question of animal welfare, offered David Magnus, a bioethicist from the University of Pennsylvania. "Would it cause other harms, and does the cat get any benefit?"

"Abraham Lincoln said he didn't trust any religion that didn't make a person treat a dog or cat better," added Jaydee Hanson, of the United Methodist Church. "Making the cat affect me less doesn't help the cat much."

In the salmon case, one key issue is environmental impact, suggested Robert Gronski, of the National Catholic Rural Life Conference. "The ecological impact would be disastrous, [given] the way thousands of cultivated fish escape from aquaculture these days," Dr. Magnus agreed. "It's too soon to introduce it."

A real-life instance of the salmon story is occurring on the eastern coast of Canada, where a US company, Aqua Bounty, has experimental facilities for transgenic salmon that it wants to sell commercially. According to the Toronto Star, two recent Canadian reports warn that federal regulations are inadequate to ensure environmental safety, and that even a few transgenic fish "could wipe out wild populations if they escape from rearing pens." According to the Star, lab tests with other fish have found that offspring from interbreeding between transgenic and wild fish produced offspring that did not survive to maturity as often as normal fish. The company has said it would introduce only sterile female salmon to avert that problem.

The industry says that speeding the growth of animals and foods will help feed the developing world. Panelists agreed that some GM products are a boon, but also that people have a right to technologies that they can control. In the Pew survey, called "Genetically Modifying Food: Playing God or Doing God's Work?" the definition chosen most often for "playing God" involved "who controls the technology and who is exposed to its risks."

One concern is the rapidity with which croplands are going to bioengineered production. Questions people have as they become more aware of the global food system, Mr. Gronski says, include: "Who is deciding what type of food we are eating?" and "How can we have some local control?"

"People need to have the option to make informed choices, and to opt out of the system," Magnus says. "If all foods are genetically modified, the option doesn't exist."

All agreed on the ethical responsibility to inform, a prime issue of debate in the US. "The FDA says it's safe, and therefore the consumer doesn't need to know; but in a democratic society, people have a right to know," says Rabbi Reiser.

The Food and Drug Administration is now modifying regulations on GM foods, but the proposed changes fall far short of the hopes of some consumer groups, which are seeking mandatory labeling and more safety research. The FDA is requiring companies to notify it 120 days before introducing products on the market and to provide information that demonstrates safety. No requirements are made for pre-market testing or for labeling.

In contrast, in the European Union, more stringent rules were proposed this week that would establish a system to trace organisms from farm to supermarket and require all GM foods to be labeled. EU governments and the European Parliament still must approve them.

GM findings in New Zealand to be considered

August 2
Canberra Times

The Federal Government will examine the findings of a New Zealand Royal commission which has backed the use of gene modification in agriculture and medicine.

Health Minister Michael Wooldridge said although Australia already had tough rules on GM products, there might be something to learn from New Zealand's experience.

He was backed by Biotechnology Australia, which described the Royal commission as the world's first appraisal of GM technology.

But the Australian Greens increased their attacks on the findings, saying the commission had ignored the will of the people.

The NZ commission was the world's first formal investigation into the pros and cons of GM technology, and examined the benefits of making New Zealand GM-free.

It found a ban on GM products would disadvantage New Zealand, lead to a contraction in the economy and the flight of the country's scientists overseas, and hurt possible research into GM medicine.

It backed the continued open trials of GM crops, and found banning GM food and medicine was not economically viable.

A spokesman for Dr Wooldridge said the commission's findings could be useful to the way Australia dealt with GM issues.

"The Government would look at any issue raised by the NZ Royal commission, but bearing in mind that Australia has some of the toughest gene technology regulations in the world," he said.

This week Biotechnology Australia issued a survey which found growing support among Australians for GM products, with a majority of respondents believing the technology would have long-term benefits.

Biotechnology Australia public awareness manager Craig Cormick said there was still a great deal of misinformation about GM products.

He said some people believed GM food, carrying the genes of fish and animals, was already available in Australia when it was not.

Mr Cormick said the NZ commission had put some facts into the argument, and shown GM technology could be used safely.

"The commission has recognized that there are benefits to gene technology and that it has passed its first test," he said.

But Greens Senate candidate in Victoria Scott Kinnear said the commission's findings were farcical and ignored the wishes of the New Zealand public.

Mr Kinnear said the NZ Government risked slamming the door on marketing itself as a GM-free nation.

He said the commission was ignoring problems being encountered in the United States with the growth of GM and traditional crops side-by-side.

"The commission itself admits that many New Zealanders oppose the use of genetic modification unless for medical purposes and that people are very uncertain about the safety of GM food," he said.

"Yet the commission has virtually given the go-ahead for this untested, unpredictable industry."

Tassie eyes GE edge on New Zealand

August 2
Mercury (Australia)

THE State Government and organic producers believe the findings of a New Zealand royal commission into gene technology may open doors for Tasmania.

After a 14-month inquiry into the controversial issue, the royal commission this week effectively embraced GE technology.

The New Zealand Government is expected to decide in November whether to adopt the recommendations, which include allowing open-air GE crop trials to continue.

The findings have infuriated green groups around Australia and have disappointed the organic farming lobby in Tasmania.

However, the Tasmanian Organic Dynamic Producers association and the State Government believe the recommendations, if adopted, will give Tasmanian producers a marketing edge.

This is because of Tasmania's unique status as a GE-free zone, thanks to the State Government's decision last week to ban GE crop trials for two years.

However, controlled GE-poppy trials are allowed.

Primary Industries Minister David Llewellyn said: "In terms of market opportunities, if the New Zealand Government accepts the proposal they may translate to an advantage based on our ability to brand Tasmanian products as GE-free."

TODP president and Deloraine organic dairy producer Joe Gretschmann agrees.

"As sad as the New Zealand situation is, it will definitely have positives for Tasmania," he said.

The commission said New Zealand should keep its options open and not ban trials of GE products. It backed the continued open trials of GE crops and found banning GE food and medicine was not economically viable.

Tasmania's GE-veto is being justified on marketing grounds and Mr Gretschmann said the decision had already provided a marketing edge.

"Just this morning I had two inquiries about organic products ... from exporters of dairy and cheese products to South-East Asia and Japan," he said.

"People up there know that Tasmania has implemented another moratorium and inquiries are already rolling in."

Tasmanian Farmers and Graziers Association GE spokesman Rod Thirkell-Johnston yesterday declined to comment on the New Zealand situation.

Mr Thirkell-Johnston said the state's two-year moratorium was acceptable, provided the time was used constructively to assess to pros and cons of the technology.

Public still wary of biotechnology - survey

August 2
AAP (Australia)

There is growing concern among Australians about the ethics of biotechnology and gene technology, particularly cloning and health-related applications, according to a new survey.

Most people feel biotechnology is developing so fast that legislation can't keep up, and the financial and political power of multinational companies is more significant than the wishes of the public.

The findings are part of the largest and most comprehensive tracking survey of public attitudes to rapid change in the scientific field.

Conducted for the federal government body Biotechnology Australia, the nationwide survey of 1,200 people was taken during April and May this year.

Manager of public awareness at Biotechnology Australia, Craig Cormick, said the research showed the public was becoming increasingly concerned about complex societal issues.

The number of people who approved of modifying human genetic material with animal genes had dropped to 44 per cent from 51 per cent over the past two years.

Three quarters of all Australians perceived risks in using human genes in animals to grow organs for transplantation.

And there was still a high level of uncertainty about biotechnology, with just under one third (28 per cent) saying they did not know what the future impact would be.

However the survey also found half of all Australians (51 per cent) believed genetic engineering would improve our lives in the next 20 years, up from 42 per cent in 1999.

"Overall, the survey indicated that the community did not feel well informed on many biotechnology issues," Mr Cormick said.

"People felt they should know more about them and that some misconceptions prevailed.

"It is clear from the research that ethical concerns were very influential in attitude formation, often being based upon whether the modification was developed with the aim of benefiting society."

Victorian Greens Senate candidate Scott Kinnear said Australia's major political parties must heed the survey's findings.

"This survey shows that the majority of Australians feel gene technology in food and drink is risky. People want GM food labeled and they wanting much better protection from the risks that these technologies present," he said.

The survey was conducted by research firm Millward Brown.

Genetic engineering watchdog, GeneEthics Network, said the survey showed that Australians had little confidence in the regulation of gene technology.

Director Bob Phelps said the survey justified a five-year freeze on further releases of genetically modified organisms to the environment until the public was satisfied that laws could adequately deal with the issues.

He said genetic engineering should be put on hold until all foods produced using gene technology were labeled, forums established for public participation on regulation, the Gene Technology Act 2000 was reviewed and laws passed to govern all genetic engineering research.

Federal memo warns against GM wheat

Canada still working with Monsanto to create country's first modified seed

August 1
Ottawa Citizen

Allowing genetically modified wheat into Canadian farming will cause hardship and expense for farmers and food processors as they try to keep some wheat GM-free for customers who demand it, an internal Agriculture Canada memo says.

The memo obtained under Access to Information laws echoes what wheat farmers have been arguing: GM and ordinary wheat crops are likely to be mixed up sooner or later, just as corn and other grains already have been.

"If transgenic wheat is registered, it will be difficult and costly to keep it segregated from non-transgenic wheat through the production, handing and transport chain," says the memo to Agriculture Minister Lyle Vanclief.

Yet the federal government is working with Monsanto Corp., one of the world's biggest biotech firms, to create the first genetically engineered wheat crop available to Canadian farmers.

Agriculture Canada has contracted with Monsanto to develop new lines of wheat resistant to the company's herbicide, Roundup. The work began in 1997.

Monsanto already sells genetically modified corn, soybeans and canola under the "Roundup Ready" label. They let farmers kill all the plants in the field except the crop they are trying to grow. Other biotech companies have similar crop lines, such as Liberty Link.

The memo warning of trouble echoes the problems farmers have had with corn and other GM crops. Some buyers, especially in Europe, insist on pure conventional grains. And there have been breakdowns in separating crops, as when StarLink, a type of GM corn approved for livestock, got into Taco Bell's corn meal.

Now the Agriculture Canada memos show the department's transgenic wheat, developed with Monsanto, is coming closer to the commercial market.

"The variety of transgenic wheat that is closest to being registered is being developed by AAFC Research Branch on (sic) contract with Monsanto," says the memo to the minister dated early this year. AAFC is Agriculture and Agri-Food Canada.

An attached briefing note adds that "AAFC is collaborating with Monsanto to develop genetically modified wheat lines with resistance to Monsanto's herbicide Roundup."

"It comes back to the mandate of the Department of Agriculture, which is to contribute to the competitiveness of the Canadian agricultural sector," said department spokesman John Culley, who oversees western research on grains.

The research is complete except for the job of gathering three years' worth of data necessary to approve the crop, he said. That would happen in 2004 at the earliest.

The project is based in the federal Cereal Research Center in Winnipeg.

"They're using the germplasm from one of Agriculture Canada's varieties to insert the Monsanto bacterial gene," said Earl Geddes, vice-president of the Canadian Wheat Board.

"This project with Monsanto is the first time that Agriculture Canada or the government of Canada has joined up with another company to actually insert genes into germplasm that's been owned by Ag Canada," he said. Germplasm is the wheat's genetic material.

It's good for the government to look for new and better wheat varieties, but not transgenic ones, he said.

"We're less enthralled that companies can now buy into that research and end up owning the varieties that are developed."

Monsanto needs Canadian government co-operation because it doesn't have access to an extensive number of wheat varieties on its own and Monsanto wants its herbicide-resistant gene inserted into a wide range of varieties.

The federal memos, obtained by Ottawa researcher Ken Rubin, forecast that a growing number of GM wheats will enter Canada soon.

"Future (10 years) GM wheats will have broad resistance to fungal diseases including FHB and improved processing quality," one says. FHB is a blight caused by the Fusarium fungus.

At the same time, the document suggests the Agriculture department may have to lead the public relations campaign to make GM wheat acceptable in Canada.

"Wheat with the novel trait of Roundup resistance is likely to be an area of concern as the industry has yet to develop a strategy," it says. ("Novel trait" is the common term for a genetic modification.) "AAFC may have to provide leadership in this area prior to registration approval and seed increases."

GM wheat varieties that resist cold weather, drought and disease will stabilize farmers' incomes, the document adds.

Meanwhile, a coalition of farm, health and citizens' groups said yesterday they fear GM wheat could put farmers out of business and destroy Canada's grain industry. They are calling on the federal government to prevent approval of the new strains.

New Zealand: All farmers threatened by possible GE release

August 1
Green Party press release

Green Party Agriculture Spokesperson Ian Ewen-Street MP today said all farmers - not just organic farmers - would be threatened by any release of genetically engineered crops or organisms into the environment.

"So far the debate following the Royal Commission report has focused on the risk of contamination to organic farmers following release into the environment of genetically engineered crops or organisms.

"While the threat of any GE release to organic farmers is huge, conventional farmers also have a great deal to lose from genetic contamination and the subsequent lack of international market confidence in the purity of their produce," said Mr Ewen-Street.

"Farmers must be acutely aware that their international success relies heavily on global perceptions of our clean, green image and genetic engineering is the antithesis of that image."

Mr Ewen-Street predicted that markets would react unfavorably to New Zealand's primary produce if there was a possibility that their purity had been compromised by genetic engineering.

"This is the issue that I do not feel the Royal Commission has addressed, yet it lies at the heart of the debate: What is the international economic value of our current GE-free status and what do we stand to lose by abandoning it?" he said.

"Farmers - despite the intensive lobbying of Federated Farmers - are well aware that there are no markets for genetically engineered produce because, quite simply, there is no consumer demand. If there is no demand why grow it?"

Mr Ewen-Street said international organic standards guaranteed there was zero genetically engineered contamination, but that the same was simply assumed of our conventional produce because it had been grown in a GE Free nation.

"If we release GE into our environment all farmers will be tarred with the same brush," he said.