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Why Monsanto Might Be Worried

Gina-Marie Cheeseman
| Friday January 15th, 2010 | 4 Comments

Monsanto made the news several times this past month, most recently for reporting a quarterly loss last week. On January 6, Monsanto posted a net loss of $19 million, or three cents a share, for the first quarter, compared to last year’s profit of $556 million or $1 a share. Net sales decreased $952 million (36 percent) for the period ending November 30. The company cited a decline in herbicide sales and smaller decline in corn and soybean seed sales as the reason for the loss.

Sales of glyphosate-based herbicide, including Roundup, decreased 63 percent in the quarter. According to Reuters, sales decreased “primarily in Brazil and Europe.” Net sales in corn seed and traits decreased nine percent, or $59 million in the quarter largely due to fewer acres planted in Brazil and Argentina.

Monsanto, the largest seed company in world, claims it can add $8 billion in gross revenues by 2020. Monsanto Chairman Hugh Grant said this year is a “critical year” to help the company meet its growth plan for 2011 and 2012. “We believe it will only get better from here,” Grant said.

In September, Jeremy Hobson of Marketplace, a radio show for American Public Media, said, “In short, cheap generic herbicides are undercutting Monsanto’s Roundup business.” However, Hobson said “it’s more complicated than that.” Mike Judd, interviewed by Hobson for Marketplace, said that because farmers’ profits are down, they are buying generic herbicides. “Basically, unsustainable profits for Monsanto over the last two years are coming to an end,” Judd said.

A quarterly loss is not the only thing Monsanto has to worry about. This Thursday, the company said that the Justice Department requested more information on its soybean traits business as part of its on-going investigation of Monsanto. The Justice Department’s request “primarily seeks confirmation that farmers and seed companies will have access to the first-generation Roundup Ready trait after the patent expires in 2014,” according to Marketwatch.

Scott Partridge, the company’s chief deputy general counsel, said, “Monsanto continues to cooperate with the U.S. Department of Justice inquiries, just as we have over the last several months.” He added, “We respect the thorough regulatory process. We believe our business practices are fair, pro-competitive and in compliance with the law.”

The Associated Press (AP) investigated Monsanto and ran a story about its findings in December. The AP obtained confidential commercial licensing agreements detailing with the company’s business practices. Monsanto uses commercial licensing agreements to spread its technology. The article stated that Monsanto is  “squeezing competitors, controlling smaller seed companies, and protecting its dominance over the multibillion-dollar market for genetically altered crops.”

Monsanto’s patented genes are inserted into “roughly 95 percent of all soybeans and 80 percent of all corn grown in the U.S.,” according to the AP article. The article further stated that Monsanto “also is using its wide reach to control the ability of new biotech firms to get wide distribution for their products.”

This is a fourth part in a series about Monsanto and other large agrichemical companies.

Check out previous installments:

Is Monsanto Unstoppable?

The Monopoly Named Monsanto

Can A Company That Makes Roundup Be Sustainable?


▼▼▼      4 Comments     ▼▼▼

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  • JJdoublej

    Here is why Monsanto is NOT competing unfairly….they could have just saved THEIR invention, RR Traits and BT Traits for their own seed brands they own. But, they decided to share their inventions through licensing to other seed companies, even to their largest competitors. Think about it. If they were trying to limit seed competition, why license out their traits to competitors?

  • Jim P

    Why license to competitors? Several reasons. 1) Licensing can be extremely lucrative, your licensee pays you a fee for EVERY unit that they make or sell, and you have none of the costs of production. 2) Licensing gives your technology quick access to other parts of the distribution chain that might take much more time to access directly. 3) It increases the pressure on your non-GMO competitors, who are the real enemy of Monsanto's strategy. 4) The real strategic goal is to stop farmers from saving and reusing seed, so that they need to buy new seed for every crop — licensing furthers that goal.

    So, no, the fact that Monsanto may license their technology to other corporations does not, by itself, mean that they are competing fairly.

  • http://www.gina-mariecheeseman.com/ Gina-Marie Cheeseman

    So true, Jim P!

  • http://www.gina-mariecheeseman.com/ Gina-Marie Cheeseman

    So true, Jim P!

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