Biotech Values

[DewDiligence]

Monsanto Revisits Soybean Sales in Argentina

[Unlike corn (where commercial seed is hybrid and hence manufacturers can’t be ripped off by bootleg seed from the prior season), soybean seed can be reused in violation of manufacturers’ licenses. Because Argentina does not have a legal framework that allows MON to collect royalties on soybeans, MON does not currently sell the second-generation RR2Y soybean product in that country.

On the other hand, Argentina grows a lot of soybeans, so MON would like to be able to sell RR2Y soybeans there to augment the expected sales in Brazil (where MON’s IP is well protected). I’m skeptical of the workaround described in this Reuters story, but it’s pure upside for MON if it works out. See #msg-60109375 and #msg-51993032 for related info.]

http://www.reuters.com/article/2011/06/07/argentina-monsanto-soy-idUSN0717504320110607

›Tue Jun 7, 2011 1:33pm EDT
By Hugh Bronstein

BUENOS AIRES, June 7 (Reuters) - Bruised by a lengthy battle over royalties in Argentina, U.S. seed giant Monsanto (MON) is asking the country's farmers to sign contracts promising to pay to use the company's new seed technology.

The unusual drive underscores Monsanto's determination to win market share in the world's No. 3 soy exporter and its jitters about operating in a country where business leaders often complain about changes to the rules of the game.

By signing agreements with individual Argentine farmers who are seeking to boost output with its genetically modified (GM) soy variety Roundup Ready 2 Yield, Monsanto says it will get extra protection to guarantee royalty payments.

"We want to sign the contracts to be sure there's a consensus ... We don't want to go with the force of law alone," Monsanto spokesman Pablo Vaquero said. Farmers accounting for nearly a third of Argentina's soy output have already signed.

Monsanto's wariness stems from its experience with the original Roundup Ready soy variety, which was never patented in the South American country -- although it became ubiquitous -- provoking years of legal wrangling with the government. The new strain has already been patented.

However, Monsanto's move has angered small-scale growers, who have been allowed to sow original Roundup Ready seeds harvested from their own fields without paying royalties.

They accuse Monsanto, the world's largest seed company, of trying to monopolize production in Argentina and of effectively excluding smaller farmers from using new seed technology by demanding too much in royalty payments.

"We're defending farmers' right to re-use their seeds because they can't pay royalties indefinitely," [LOL—then don’t use MON’s proprietary seeds] said Julio Curras, a leader of the Argentine Agrarian Federation, which represents small- and medium-sized farmers.

Monsanto has genetically modified corn, soy and other crops to tolerate treatment with its glyphosate-based Roundup herbicide, making it easier for farmers to kill weeds.

The Roundup-resistant seeds have been a major revenue driver for Monsanto, but the patent on the first Roundup Ready strain expires in 2014 and the company has been trying to convince customers to move to the newer version.

It says the Roundup Ready 2 Yield soy has heightened resistance to certain pests and herbicides, boosting yields.

Monsanto was unable to patent the original Roundup Ready soy in Argentina. The company's battle to get royalties dragged on for years and saw court injunctions hold up Argentine soymeal shipments in European ports.

The company is under time pressure because Roundup Ready 2 Yield is set to be introduced next year in neighboring Brazil. [Unlike Argentina, Brazil has established a process by which MON collects royalties when growers bring their soybeans to market.]

If Argentina does not have a new control system by then designed to protect the patent and allow Monsanto to license local seed dealers to sell Roundup Ready 2 Yield, the seeds will likely be smuggled in from Brazil [as happened with first-generation Roundup Ready soybeans].

GMO BOOST

The introduction of GMO soy has helped Argentine farmers boost output dramatically over the last 14 years, but industry analysts say current rules deter seed companies from marketing strains using the latest technology.

Agriculture officials are working on a reform of the country's seed law, but the bill is unlikely to be sent to Congress before an October presidential election and some analysts think it could take two years to become law.

Small-scale growers would be exempted from the new law and allowed to carry on saving seeds from the harvest to replant at sowing time, without having to pay royalties. [This sounds like a deal-breaker, IMHO.]

In the meantime, many farmers have signed Monsanto's contracts because they fear losing competitiveness if they miss out on new varieties being used by their counterparts in other leading grain exporters such as Brazil and the United States.

Competitiveness is a concern in Argentina, where farmers pay a 35 percent export tax on soybeans and double-digit inflation is increasing costs.

"In the short term, the way forward is going to be through contracts," said Ernesto Ambrosetti, chief economist at the Argentine Rural Society, which represents some of the country's biggest soy farmers.

"We don't have the luxury of falling behind or losing productivity."‹