December, 1999
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The 'Frankenfood' monster stalks Capitol Hill

December 13
Business Week

For five years, a backlash against genetically modified foods has raged in Europe, where gene-spliced products now must carry special labels. And millions of consumers are boycotting what British tabloids have dubbed ''Frankenfood.''

Yet even as U.S. farmers and food processors looked on in horror, they clung to the belief that it couldn't happen here. Suddenly, they're not so sure. Consumer and environmental groups are turning up the heat on Congress and regulatory agencies to crack down on biotech foods. Food growers and processors are on the defensive and girding for a huge lobbying battle.

Kelly D. Johnston, chief lobbyist for the National Food Processors Assn., said, ''Without question, this is the top issue our industry faces in the next 5 to 10 years.''

A key flash point: legislation introduced on Nov. 16 that amends federal statutes to require food companies to disclose genetically modified ingredients on product labels. The bipartisan bill, sponsored by Representative Dennis J. Kucinich (D-Ohio), has backing from 20 other lawmakers, including House Minority Whip David E. Bonior (D-Mich.).

More than a dozen interest groups, such as Consumers Union and Friends of the Earth, support the measure. Said Kucinich: ''This is just the beginning of a grassroots movement. Labeling is inevitable.''

Those are fighting words to the food industry, which points out that the FDA in 1992 decided that special labels on superfoods like the Flavr Savr tomato weren't needed. At a Nov. 30 meeting in Washington, however, anti-biotech forces displayed documents showing some dissension within the FDA back then. Whether an internal debate persists is unclear, but the agency in October surprised foodmakers by deciding to hold public hearings. Now, food companies, which regard mandatory labeling as tantamount to slapping a skull and crossbones on packaging, are going on the offensive.

For starters, they're beefing up their Washington staffs with pricey lobbying talent. Hired guns include former top regulators whose credentials give them credibility on Capitol Hill, such as Michael R. Taylor, Monsanto Co.'s (MTC) chief rep in Washington. Taylor is a former deputy commissioner for policy at the FDA and former top official at the Agriculture Dept.

Pro-biotech forces are also relying on ex-farm state lawmakers to open doors. General Mills Inc. (GIS) has retained ex-Representative Gerry Sikorski (D-Minn.), and Kellogg Co. (K) has ex-Representative Peter Hoagland (D-Neb.).

The story also notes that industry is sending fat campaign checks to friendly lawmakers, too. In this year's first nine months, the Alliance for Better Foods, a coalition of 38 trade associations, gave more than $676,000 to lawmakers and political parties, 83 percent of it to Republicans, according to the nonpartisan Center for Responsive Politics.

Johnston added, ''A lot of companies and associations are willing to spend millions'' to defeat labeling.

The lobbying pressure may be working. When Kucinich sought co-sponsors for his labeling measure, 27 House members who previously signed a letter calling on the FDA to require labeling dropped out. One food industry source said a ''company or constituent contacted every lawmaker to educate them'' about labeling's cost.

A Sept. 23-26 Gallup poll shows Americans so far are unperturbed about biofoods. Only 27 percent believe genetically modified foods pose a serious health threat. But that could change as awareness grows. As the fury over Frankenfoods shows, controversy can cross the Atlantic just as easily as Roquefort and Chianti.

Farmers stick with biotech crops

December 4
AP

WASHINGTON - Two months ago, Minnesota farmer Mark Ufer was ready to swear off genetically engineered crops. He figured the growing controversy over biotech food would make it easier to sell conventional corn and soybeans next year.

Now that it is time to order next year's seed, he has changed his mind. ``The genetically enhanced movement is so widespread that I don't think a person can realistically not be a part of it,'' he said.

Farmers have been switching in droves to genetically engineered corn and soybeans over the past three years. There is growing evidence that they plan to stick with the crops next year despite backlashes against biotechnology in Europe and Japan and producers' lingering worries about the industry's future.

Two-thirds of the corn seed and three-quarters of the soybean seed that farmers have ordered from Novartis Seeds Inc. for next year are genetically engineered, a slight increase over this time a year ago.

Novartis is among the nation's largest seed suppliers. About 70 percent of the corn seed and half the soybean seed that Novartis expects to sell for the 2000 crop had been ordered as of Dec. 1.

The demand for biotech seed ``is as strong as it's been at any time since we introduced it,'' said Jack Bernens, the company's vice president of marketing. The government estimates that 57 percent of the soybeans that farmers grew this year contains a gene that allows it to tolerate use of the popular Roundup weed killer. Another 30 percent of the corn grown this year was biotech, engineered to make it toxic to the European corn borer, a chronic problem for farmers.

In a Nov. 22 letter to investment analysts, Monsanto Co. acknowledged that there was more indecision than usual among farmers as to their planting intentions for next year. But Monsanto's market research indicates the demand for biotech seed will be ``on par with the 1999 season,'' the letter said.

Monsanto has a lot at stake. Along with holding patents in the technology, Monsanto sells seed though its Asgrow and DeKalb subsidiaries, and also makes the Roundup herbicide.

The American Soybean Association, which is holding a series of seminars in the Midwest to sound out farmers and address their misgivings about biotechnology, also is not expecting any wholesale shift to conventional varieties.

``We have no reason to believe that the adoption of the technology will not continue,'' spokesman Bob Callanan said. ``We still think there's strong interest from the growers. ... The growers like and have embraced the technology.''

A series of developments caught farmers by surprise this summer and early this fall, which led to fears they would have trouble selling their biotech crops. That in turn would make it difficult to recover the seeds' higher costs.

Amid the growing controversy over biotech crops, baby-food makers Gerber and Heinz announced they no longer would use genetically modified ingredients. A major U.S. grain processor announced plans to pay a premium for conventional crops, while a second company advised its suppliers to start separately storing conventional and biotech grain. 

Analysts feared the moves would lead to price cuts on biotech grain, if not this fall then next year, and a shortage of conventional seed varieties next spring.

As it turns out, relatively few grain elevators have been requiring farmers to separate their crops, surveys have found. The feared price cuts for biotech grain have not materialized, either.

One major grain buyer, Cargill Inc., is even paying an extra 5 cents a bushel for soybeans that contain low amounts of dust and other foreign matter, which typically means the biotech variety, said Callanan.

Ufer, who farms near Truman, Minn., sells much of his corn to an ethanol cooperative, whose board voted not to accept genetically modified crops as of next year. The problem for the cooperative is that it sells a byproduct, distillers' grain, for export as livestock feed.

The cooperative since has reversed its decision. That has eased some of Ufer's concerns.

But he, like other farmers, still has a variety of concerns they are weighing as they order seed. The genetically engineered corn, for example, will cost farmers money if infestations of the European corn borer are low. Also, the herbicide-tolerant soybeans sometimes yield less than conventional varieties, farmers have found.

Producers face ``real tough management calls that are going to be made on a farm-to-farm basis and in some cases on a field-by-field basis,'' said Ross Korves, an economist for the American Farm Bureau Federation. 

The American Corn Growers Association, the smaller of two organizations representing corn farmers and a critic of biotechnology, predicts a 20 percent to 25 percent reduction in genetically engineered corn next year. 

``If the consumer unrest continues, we think that this issue is not going away,'' said Gary Goldberg, a spokesman for the group.

Biotech attacks at home, at WTO

December 4
National Post (Canada)

By Terence Corcoran

Canada's biotech industry, a world leader by any standards, has every reason to feel under siege. At the WTO mayhem in Seattle, the industry was fighting Greenpeace and a group of European nations that want to keep biotech off the WTO agenda. 

The Greenpeace plan is to move biotech out of the science-based grasp of the WTO and turn it over to the wobbly hands of another international forum, the Biosafety Protocol, where hard science is likely to take a back seat to fear, junk science and green activism. At the WTO, trade is generally expected to increase. At the Biosafety Protocol, trade is guaranteed a hard time.

At home, Canada's biotech industry faces other foes. The industry association, Biotech Canada, has just sent a letter to Harrison McCain, chairman of McCain Foods, expressing disappointment over McCain's decision to ban the purchase of genetically modified potatoes from New Brunswick growers. 

"While we appreciate your acknowledgement that there are no scientific reasons for your decision," said association president Joyce Groote, "it is unfortunate that your marketing considerations appear to be based on the views of a small but very vocal minority of activists." 

The letter was circulated to cabinet ministers, politicians and industry officials all over the country.

The impact of McCain's decision, outlined by Guelph University professor Douglas Powell in an article on this page, is more trouble for the industry. As Ms. Groote adds in her letter, McCain has contributed to consumer uncertainty and doubt, and raised questions about Canada as a place to invest in new technologies. 

"Your decision was particularly surprising, given that McCain has been a strong supporter of integrated pest management one aspect of which is genetic modification to control potato beetles which damage crops and reduce farmers' yields."

So far, McCain's explanations for its ban on genetically modified potatoes have been short on clarity. In some cases, the company has told industry officials that the ban is a short-term marketing decision for the Y2K potato crop only. The company has said it is simply concerned that American farmers who do not use modified potatoes could seize market share if a consumer backlash developed over modified food. With its decision, of course, McCain could help create that very backlash.

But there appears to be more to McCain's decision than concern over U.S. potato farmers. A McCain Foods official in an interview painted a much larger picture of a company preparing for major corporate-wide action. 

McCain may even be preparing to screen out all genetically modified food entering the company's supply chain. 

When asked about peas, beans, canola oil, tomatoes and other food products that go into McCain products, the McCain spokesperson said: "We don't know where [other ingredients we use] are coming from. That's what we're trying to identify ... We're surveying our suppliers and attempting to get the answers to these questions." One problem, she said, is that there is no segregation of genetically modified and non-modified food. Most canola oil used in food preparation in Canada is from modified seeds, but the company doesn't know yet whether it uses modified canola product. "The situation with oil is very unclear."

The company's pre-emptive move against potatoes also jumps the gun on an industry-wide attempt to come up with clear labeling standards. Grocers, food manufacturers and the Canadian Federation of Agriculture are preparing a plan that would label foods based on standards that would make it possible for consumers to understand what's what in their food and make their own choices.

With McCain's move, the labeling effort always at some risk of running off the rails is put in some jeopardy. Even with labels, every food company is going to have to be able to identify and possibly segregate the modified content of its products. 

To date, nobody has added up the cost of such a wasteful effort to placate Greenpeace, the Council of Canadians and other activists. In the end, it won't  placate them anyway. They openly state that their real objective is a world-wide ban on genetically modified organisms. Nothing short of a skull and cross bones label is going to make Greenpeace happy.

Back at the WTO, the international fight over the future of biotech will continue. Canada currently wants to keep the regulation of genetically modified food and other products of biotechnology from falling into the hands of international activists and green bureaucrats. 

The assumption is that if biotech products can be kept within the WTO, where science tends to prevail, then science will drive trade in biotech. But if biotech becomes the exclusive franchise of the Biosafety Protocol, the industry could be hung up in an environmental swamp for decades. The protocol is now being negotiated under the wing of the Biodiversity Convention, the global green monster created by the United Nations at the infamous 1992 Rio conference. 

The next Biosafety Protocol negotiating session is in Montreal next month. At home and abroad, Canada's biotech industry is defending its turf and fighting for its long-term survival.

Chances bleak for biotech working group, US says

December 3
Reuters

"The odds are not great," Tim Galvin, head of the department's Foreign Agricultural Service, told Reuters.

The United States had hoped to persuade other WTO members to support a working group to discuss approval procedures for genetically modified crops, with the eventual goal of crafting international rules.

U.S. farmers have lost about $200 million in corn sales over the past two years because new genetically modified crop varieties planted in the United States have not been approved by the Europe Union.

A consumer backlash against genetically modified food -- derided by critics as "Frankenfood" -- also has prompted the EU and Japan to establish labeling requirements. That has further complicated the situation for U.S. food companies and exporters.

Farmers in only a few countries outside the United States have any experience with genetically modified crops, which contain a gene from another organism to increase resistance to herbicides and pest.

That lack of experience may have hurt efforts to establish a working group, U.S. industry officials said.

EU proposal rejected as too wide-ranging by US

A new EU proposal for a broadly focused working group that would consider consumer and environmental concerns was rejected by U.S. negotiators.

"Our objective was to get a working group we could support," Galvin said. In the U.S. view, the EU's proposal was too wide-ranging, he said.

The United States could still submit a proposal to negotiate on biotechnology issues, if trade talks begin as expected next year. WTO members have been working on language this week to launch a new three-year round of talks on agriculture, services and other areas.

The American Farm Bureau Federation, the largest U.S. farm group, has advocated moving immediately to negotiations on biotechnology approval rules because of the fear a working group would delay progress on resolving current trade issues.

At the same time, many countries want to keep biotechnology separate from negotiations on other agricultural issues, such as export subsidies and import tariffs. They are concerned the controversy over biotechnology could drag out the farm talks.

Karil Kochenderfer, director of international trade and environmental affairs for the Grocery Manufacturers of America, said her organization had hoped a working group would reaffirm WTO food safety rules applied to biotechnology.

"Clearly the engagement of (agriculture) and trade ministers in this debate in a formal way would be a positive development," Kochenderfer said.

That would counter a U.N. effort led by environmental ministers to craft rules that could restrict trade in genetically modified products.

"I think it's clear to us that biotechnology will be addressed" in upcoming trade talks, Kochenderfer said. "It's just the manner is unclear."

The U.S. food industry also will continue to push for resolution of trade issues involving genetically modified products through bilateral talks with the EU and other countries, she said.

Novartis-AstraZeneca link turns up heat on Monsanto

December 2
Reuters

European life science firms Novartis AG and AstraZeneca Plc. said they would merge their agribusinesses to create the world's largest agchem company.

Analysts on both sides of the Atlantic said the agreement may be the death rattle for the life sciences strategy, pioneered by Monsanto, that marries fields such as biotech drugs, nutrition and agriculture.

Speculation had surfaced last month that Novartis was interested in acquiring all or part of Monsanto.

"This takes the Novartis rumor out of play, but I don't think it limits the potential for Monsanto to find a partner," said Christine McCracken, agribusiness analyst with Midwest Research. "All these companies backing away from life sciences makes it more likely that they (Monsanto) will spin off the agribusiness independently."

A spokeswoman for St. Louis-based Monsanto declined to comment on the Novartis-AstraZeneca deal or the implications for Monsanto.

Monsanto, its stock languishing over the past year, has been under increasing pressure to abandon the life sciences strategy and sell off its coveted Searle pharmaceutical unit, which boasts the blockbuster arthritis drug Celebrex, among other products.

Its share price had been mired in the mid-30s after its merger deal with drug company American Home Products Corp. collapsed last year, but it rebounded into the 40s recently when the Novartis rumors arose. The stock was up 1-3/8 at 43-1/8 in heavy volume midday New York Stock Exchange trading.

Even with Novartis likely out of the picture, analysts said they still expected Monsanto to be acquired, but perhaps in pieces rather than as a whole.

The analysts said there was no shortage of interest in Monsanto's Searle drug unit. Finding a buyer for the agchem division, which makes Roundup herbicide and controversial genetically modified seeds, may be a tougher task.

The genetically modified seeds have sparked fierce opposition, especially in Britain where critics say there has not been enough research to conclude the crops won't hurt the environment and that food made from them is safe.

Among the most popular with farmers are corn and soybean seeds that were modified to resist pests or withstand powerful herbicides.

"I just don't think that anyone is going to buy into life sciences now," McCracken of Midwest Research said.

But Sano Shimoda, head of BioScience Securities, a California firm that specializes in biotechnology stocks, said investors underestimated how long it would take for the life sciences strategy to pay off, and quitting now would be short-sighted.

"This whole life science strategy was a great concept," he said. "I don't think people recognized that this was an evolutionary strategy, not one whose payoff would be today or tomorrow."

He said splitting the drug and agribusiness units would be a mistake, but added that Monsanto may have to do just that if its stock price remains depressed.

"Monsanto is fighting fires on all fronts," Shimoda said. "Celebrex has done tremendously for them, but this whole GMO (genetically modified organism) issue has created a black cloud, and that has impaired their stock price. Monsanto has to look at what kind of strategic actions to take."

Greenpeace blocks Europe's largest soybean importer, halts U.S. shipment

December 2
Greenpeace (USA) press release

WASHINGTON -- Greenpeace today blocked the gates of a soybean mill owned by the world's largest grain trader, Cargill, in Brest, France, and prevented transportation of genetically modified (GMO) crops from leaving the plant. The action was intended to stop the flood of GMO crops from the U.S. to Europe and to call on Cargill to cease importing GMO crops to Europe. Cargill is the leading importer of soybeans to Europe.

"The message has been sent by the European public: 'We don't want U.S. GMO crops,'" said Charles Margulis, Greenpeace GMO campaign. "So why is Cargill con-tinuing to act as a conduit for this stuff into Europe? Today we delivered the mes-sage that enough is enough."

Most supermarket chains and major food producers in France and Europe have now adopted a GMO-free policy. Most animal-feed producers and animal breeders in France want to use non-GMO animal feed only, but have not been able to locate the supply, according to information acquired by Greenpeace. It is also impossible for farmers to avoid animal feed with GMO ingredients since no labeling rules for animal fodder exist in the EU.

"Two days ago Cargill issued a statement about studying the segregation of GMO crops from conventional crops, if consumers were prepared to pay a higher price for that," said Arnaud Apoteker, Greenpeace International GMO campaigner. "But European consumers expect food giants like Cargill to respect their rejection of GMOs in the food chain, including animal feed. We demand that Cargill immediately stop force-feeding European consumers with unwanted and unneeded GMOs."

About 95 percent of the soya grown in the U.S. is used for animal feed. In 1998, the EU imported nearly 15 million tons of soybeans. During the three years of commercial growing of GMO soybeans, U.S. soya exports to Europe have dropped by about 39 percent, while GMO-free exports from Brazil rose from 3.1 to 5.4 million tons.