Battle of the beans: Monsanto faces a fight for soy market
WINNIPEG, MANITOBA/ CHICAGO: Monsanto Co is facing major threats to its historic dominance of seed and herbicide technology for the US$40 billion US soybean market.
Rivals BASF SE and DowDuPont are preparing to push their own varieties of genetically modified soybeans.
At stake is control over seed supply for the next generation of farmers producing the most valuable US agricultural export.
The market has opened up as Monsanto’s Roundup Ready line of seeds - engineered to tolerate the weed killer glyphosate – has lost effectiveness as weeds develop their own tolerance to the chemical.
Compounding the firm’s troubles is a national scandal over crop damage linked to its new soybean and herbicide pairing – Roundup Ready 2 Xtend seeds, engineered to resist the chemical dicamba.
The newly competitive sector has sown confusion across the US farm belt, particularly among smaller firms that produce and sell seeds with technology licensed from the agrichemical giants.
Many of these sellers told Reuters they are amassing a surplus of seeds with engineered traits from multiple developers – at substantial extra cost – because they can only guess which product farmers will buy.
“Our job is to meet our customers’ needs, and we don’t know what those are going to be,” said Carl Peterson, president of Peterson Farms Seed near Fargo, North Dakota.
“I don’t think I’ve ever seen anything quite like this.” Monsanto has much to lose. Soybeans are the key ingredient in feed used to fatten the world’s cattle, pigs, chickens and fish.
Net sales of Monsanto’s soybean seeds and traits totalled almost US$2.7 billion in fiscal 2017, or about a fifth of its total net sales.
Gross profits from soybean products climbed 35 per cent over 2016, beating 15 per cent growth of its bigger corn seed franchise.
The firm faces multiple lawsuits, along with regulatory restrictions in some US states, because dicamba has drifted onto neighbouring farms and fields and damaged crops not genetically modified to resist it.
BASF and DowDuPont, however, have their own obstacles to overcome, fuelling unprecedented uncertainty among farmers over which seeds they will plant on an estimated 90 million acres of US farmland this spring.
BASF is just entering the market, aiming to compete with an older soybean line called LibertyLink, which the firm is acquiring from Bayer AG.
DowDuPont is eager to join the fray but needs approval from Chinese regulators before it can broadly market and sell its new soybean product, Enlist E3.
Monsanto declined comment to Reuters on competition from rivals in the soybean market.
But the firm has previously acknowledged the intensifying threat to its bottom line as rivals launch new products.
“Our competitors’ success could render our existing products less competitive, resulting in reduced sales compared to our expectations or past results,” Monsanto said in an annual report filed with the US Securities and Exchange Commission last year.
The name of Monsanto’s new dicamba-based herbicide – XtendiMax with VaporGrip – reflects the problem it tries to solve: the chemical’s tendency to vaporise and drift to neighbouring fields, damaging crops.
But last summer, after farmers planted Monsanto’s new dicambaresistant seeds en masse, the herbicide damaged an estimated 3.6 million acres of soybeans, or 4 per cent of all US plantings.
Monsanto maintains its new formulation of dicamba reduces drift effectively.
It blames farmers for not following spraying instructions and for illegally applying older versions of dicamba on Xtend seeds.
Despite the controversy, Xtend soybeans have sold briskly, spanning 20 million US acres in 2017, their second year of sales.
Monsanto projects that acreage will double this year, accounting for about 44 per cent of all planted acres.
Still, Monsanto faces a slew of regulatory, legal and public relations challenges from the crop-damage crisis.
Regulators in Arkansas, where crops were heavily damaged in 2017, have prohibited the use of dicamba-based herbicides between dates that likely will cover the entire growing season.
Missouri, Minnesota and North Dakota have also restricted when farmers can spray dicamba.
Missouri farmer Bobby Aycock joined one of several class-action lawsuits against Monsanto after dicamba spraying by nearby farmers damaged his crops in 2016.
He then planted Xtend in 2017 to ensure that drifting dicamba could not harm his crop again.
He found another benefit at harvest time: his highest yield in 33 years of soybean farming.
Despite his lawsuit against Monsanto, Aycock plans to sow Xtend seeds again this spring.
“If something’s working,” he said, “I hate to change it.”
BASF is waiting for Monsanto and Bayer to close their proposed US$63.5 billion merger before it can take over Bayer’s LibertyLink brand of seeds, which are engineered to withstand the chemical glufosinate.
The timing of the takeover, expected in the spring planting season, is awkward because farmers may have already bought seeds.
BASF aims to prevent any “customer disruption” when it assumes control of the LibertyLink brand as part of a US$7 billion deal with Bayer, BASF vice president Scott Kay said in an interview.