The earnings warning was just a precursor.
By Don Quijones,
Monsanto, the world’s largest seed manufacturer, is not having a good year. The company recently slashed its 2016 earnings forecast from the $5.10-$5.60 per share it had forecast in December to $4.40-$5.10, claiming that about 25-30 cents of the reduction was due to the stronger dollar. But judging by recent trends, a strong dollar could soon be the least of its concerns.
Across a number of key markets, the company is facing growing resistance, not only from farmers and consumers but also, amazingly, governments.
In India, the world’s biggest cotton producer, the Ministry of Agriculture accuses Monsanto of price gouging. It even imposed a 70% cut in the royalties that the firm’s Indian subsidiary could charge farmers for their crop genes, prompting Monsanto to threaten that it would withdraw its biotech crop genes from the country.
If Monsanto’s threat was a bluff, it’s just been called. According to Mandava Prabhakara Rao, the president of the National Seed Association of India (NSAI), Monsanto’s threat came as a big relief:
All these years, the company has restrained us from using technologies other than the one developed by it. It forced the seed firms to sign the licence agreements that barred them from using other technologies.
India’s government also seems unconcerned by the prospect of Monsanto’s withdrawal.“It’s now up to Monsanto to decide whether they want to accept this rate or not,” said Minister of state for agriculture and food processing, Sanjeev Balyan. “We’re not scared if Monsanto leaves the country, because our team of scientists are working to develop (an) indigenous variety of (GM) seeds.”
India’s pushback against Monsanto is part of a gathering global backlash against Monsanto and the GMO industry as a whole. Even in the U.S., where GMOs are estimated to represent more than 90% of corn, soybean, and cotton acres, the trend is no longer Monsanto’s friend. Earlier this year the company filed a lawsuit against the state of California for its intent to label glyphosate, the main chemical used in Monsanto’s flagship Roundup herbicide, as a probable carcinogen, in accordance with the World Health Organization’s recent findings.
There’s also growing pressure on major food outlets to stop using GMO ingredients. After the USDA’s 2015 approval of genetically modified apples and potatoes, companies including McDonald’s Corp. and Wendy’s Co.claimed they didn’t plan to use them, saying they were happy with non-GMO suppliers. Even more importantly, the Orwellian-titled Deny Americans the Right to Know (DARK) act, aimed at prohibiting mandatory GMO labelling, was defeated in the Senate last week.
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Meanwhile, in Mexico, Monsanto’s fourth biggest market after the U.S., Brazil, and Argentina, a moratorium remains in place on the granting of licenses for GMO seed manufacturers like Monsanto, Dow, and Du Pont. In the face of growing public and judicial opposition, Monsanto & Friends have pinned their hopes on the Peña Nieto government’s upcoming agrarian reform act.
Manuel Bravo, Monsanto’s director for Latin America, recently told El Paísthat he is confident that once the legal problems in the courts are “resolved,” the issue will become a central plank in the current administration’s agenda. “The Government has been very clear about the importance of these technologies,” he said.
Across the Atlantic, Monsanto’s problems are somewhat more intractable. Already more than half of EU countries have moved to bar GMO cultivation, while a last-minute mutiny by four EU states (France, Sweden, Italy, and the Netherlands) recently forced the postponement of a vote in Brussels on re-licensing glyphosate.
The reason for the postponement is simple: If the vote had gone ahead, there would have been no way of securing the 100% approval needed to renew the license for another 15 years. As a result, a herbicide that dominates crop cultivation in many European markets and which provided €4 billion of earnings and over €1 billion of profit for Monsanto alone last year, would have lost its license. And that is the last thing the European Commission and the massive agribusiness lobbies that generously line its pockets want.
In time-honored fashion, the Commission has promised to “renegotiate” the matter, while Jean-Charles Bocquet, the director of the European Crop Protection Agency, a front lobby organization for Monsanto & Friends, let his rage rip in a disarming display of frankness: “We are very upset that countries were influenced by significant political pressure from the environment committee of the European parliament, NGOs, and the precautionary principle.”
The precautionary principle states that if there is even a suspected risk of causing harm to the public or to the environment, then, in the absence of scientific consensus that the action or policy is not harmful, the burden of proof that it is not harmful falls on those taking an action, in this case, Monsanto and the agrochemical lobby. It’s even law in the EU.
Proving the unprovable could be a very difficult task, even for Monsanto & Friends — hence Bocquet’s public admission of the ECPA’s withering disdain for precaution regarding human health or safety. It’s also no coincidence that the agrichemical business lobby is the biggest lobbyist on the EU-US trade deal (TTIP), which is feared would significantly water down EU chemical safety standards, including the precautionary principle.
While Monsanto and friends struggle to preserve their markets in Europe, Russia, one of the world’s largest agricultural markets, has ruled out approving the use of any biotech crops in the cultivation or production of food, largely in retaliation to sanctions imposed by the U.S. and Europe in 2014. As for China, it allows cultivation of some GMOs but isn’t expected to approve new ones any time soon, at least until its own agrichemical businesses are on a more equal footing with their U.S. rivals.
As the global backlash against GMOs grows, the market’s once-spectacular growth is grinding to a halt. In 2014 sales grew 4.7% to $21 billion, compared with 8.7% growth in 2013 and average annual growth of 21% from 2007 through 2012. According to Mike Mack, the former CEO of Swiss-based (and now Chinese-owned) Syngenta, biotech seeds have nearly saturated major markets where approved:
Show me the new markets or the new crops that are going to bring the sort of wave that we saw in the last decade. I don’t see how it’s going to pick up in a material way anytime soon.
And that is very bad news for a company that is already on the back foot in many of its key markets and which is waging what appears to be a losing battle for the hearts and minds not only of global consumers but also national governments. By Don Quijones, Raging Bull-Shit
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