Published on October 17th, 2010 | by Jeremy Bloom26
Be Nice to Monsanto, They’re Having a Very Bad Year
Last year, Monsanto made more than $4 billion in profits.
That was last year. This year, Monsanto is tanking. Here’s what Forbes has to say this year:
Forbes made Monsanto the company of the year last year inThe Planet Versus Monsanto. I know because I wrote the article. Since then everything that could have gone wrong for the genetically engineered seed company….has gone wrong. Super-weeds that are resistant to its RoundUp weed killer are emerging, even as weed killer sales are being hit by cheap Chinese generics. An expensive new bioengineered corn seed with eight new genes does not look impressive in its first harvest. And the Justice Department is invesigating over antitrust issues. All this has led to massive share declines. Other publications are making fun of our cover story.
How did things go so wrong?
Monsanto had the Greatest Business Model EVER!
Here’s how it works:
- Monsanto sells an herbicide called Roundup. It kills plants.
- Monsanto used genetic engineering to insert a gene into a soybean plant that keeps Roundup from killing it.
- Farmers plant the Roundup Ready Soybeans TM, and then douse the fields with Roundup. All the weeds are killed with hardly any work for the farmers.
As you can see, Monsanto gets you every which way. The farmers have to buy Monsanto’s seeds and ONLY Monsanto’s seeds, they buy Monsanto’s weedkiller, and they have to keep buying from Monsanto year after year.
For 10,000 years farmers made a living by planting seeds, tending the plants, and in the autumn eating and selling most of their crop, but keeping a percentage as seed stock to plant the next year. Monsanto put a stop to that; it’s theft of their intellectual property!
What to you and me look like, you know, genes, the building blocks of life developed by mother nature over billions of years, Monsanto has patented, locked down, and made exclusive.
If you grow Monsanto soybeans, you sell the whole crop. You don’t save some for seed. For next year’s crop, you have to go back to Monsanto and pay them for seeds again. Every year. Or they take you to court.
Just to make sure, Monsanto has been buying up companies that perform the essential agricultural task of seed sorting. And shutting them down.
But you can’t avoid paying Monsanto just by, you know, not being a Monsanto customer. Monsanto has taken farmers to court when the wind happened to blow pollen containing Monsanto patented genes into their fields. That, too, is theft of intellectual property.
For a while this worked great. Farmers that didn’t mind spraying their fields with toxins made money, Monsanto made money, and if nobody really liked them and their take-you-to-court bullying ways, at least everyone was profiting off their intellectual property.
But did you notice a hole in their business plan? There are a couple.
The first one is: THERE IS A GENE FOR RESISTANCE TO ROUNDUP.
Oh, yeah. If soybeans can be made resistant to Roundup, so can other stuff. Over the past 15 years, so-called “superweeds” have emerged that have developed resistance, just as superbacteria have emerged with resistance to penicillin and other antibiotics.
For a while, that was okay by Monsanto – if you dump more and more Roundup on the fields, you’ll still kill most of the weeds. According to Friends of the Earth (via Sourcewatch),
“the emergence of glyphosate-resistant weeds has driven a more than 15-fold increase in the use of glyphosate on major field crops from 1994 to 2005″
Which leads us to business plan problem #2: glyphosates.
The Roundup Ready gene is intellectual property.
But Roundup… is just a basic weedkiller, based on a family of chemicals called glyphosates.
Last year, Bloomberg was able to report:
“Farmers are willing to pay for good technology to increase yield,” Mark Demos, a portfolio manager at Fifth Third Asset Management, said today from Minneapolis. “The economics of buying Monsanto seed, even at higher prices, are pretty good.”
Enter the Chinese. They started dumping a cheap Roundup knock-offs for 50 percent less than Monsanto charges for Roundup. Monsanto never even saw this coming, they’re cutting prices like crazy, and it’s taken a $400 million hit out of Monsanto’s bottom line. Ouch!
The clock is running out
Their patents on Roundup Ready Soybeans run out in a couple of years.
They’re getting hit for hiring a division of the old Blackwater Security firm to dig up dirt on anti-GMO activists.
And now a medical study has raised concerns linking Roundup and glyphosates to birth defects.
Where does that leave Monsanto? Here’s Robert Langreth’s conclusion over at Forbes:
Forbes senior editor Matt Herper (co-author on the orginal story) and I argue over whether Monsanto stock has a shot at making a comeback. Matt argues that if the company opens up its research, and comes up with some new hits that appeal to consumers (not just farmers) it has a chance at making a comeback. It is working on a new soybean seed for example that has naturally high levels of omega-3 fatty acids. That could appeal to health-conscious consumers.
But I’m worried that the situation is more like the one when Forbes made Pfizer company of the year in 1998. The company had just introduced Viagra to worldwide acclaim and it seemed like nothing could go wrong. Then everything did. Since then it has been all downhill… Like Pfizer in its field, Monsanto is destined to remain the dominant bioengineered seed company for some time to come. But unless it comes up with a hot new product, its growth years could all be behind it.
And wouldn’t that be sad?
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