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| Roundup: what's next? (updated) |
Posted: Wednesday, June 24, 2009 2:57 pm
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First, Monsanto shed its pharmaceutical and chemical businesses -- which became known as Pharmacia and Solutia, respectively. Then it sold its Posilac dairy product business to Eli Lilly. Now, is it looking to sell its Roundup herbicide business. No. What's next? Plenty.
Don't ask the activists -- they're still gabbling about the Vietnam era and Agent Orange. Or chortling over the sale of Posilac as though it were due to their efforts.
This is real business.
Reuters blog quotes Monsanto CEO Hugh Grant as saying:
"Over the last six years, Monsanto's business has undergone a dramatic transition from a company historically built on chemical innovations to one focused on delivering enhanced seed offerings that help farmers get more out of each acre of farmland while reducing the footprint of the inputs used on that land. The actions announced today will allow our company to better navigate in today's changing business environment and keep the company on a clear path for growth.
"We believe these steps are in the best interests of our shareowners, our customers and our employees. This is designed to bring more clarity and predictability to our Roundup business and greater focus to our growing seeds and traits business."
Reuters' Chris Kaufman speculates that the company "may look to put the [Roundup] business in some kind of trust to protect shareholders from getting zapped", and in the headline suggests Roundup may be a "toxic asset".
That's surely a double entendre. Roundup, known generically as glyphosate, has an unparalleled record of non-toxicity. As a substance. For Monsanto shareholders, though, it's certainly less than palatable.
Monsanto's patents on glyphosate have expired, allowing competing products to emerge on the market.
In its third-quarter financial results, reported on June 24, the company announced revenue down 11 percent from the previous year, and that declining revenue from "agricultural herbicides like Roundup" were "only partially offset by increased revenue from seed and trait products".
In other words, the herbicide business is hurting the rest of the business -- and Roundup might not be the only casualty of a new spinoff. Furthermore, Monsanto plans to slash 900 people from the work force.
That's about as much of the 'why' that we're bound to learn about the spinoff, any time soon. The more important question is, what's next?
Roundup, and glyphosate in general, is in trouble. Though its value to agriculture around the world is tremendous, especially when coupled with herbicide-tolerant crops, no effort was made to prevent the emergence of resistant weeds--a common fate for all herbicides, and foredoomed to occur with one so popular. The emergence of resistant weeds will continue, and with that, the value of glyphosate will diminish. As a result, more toxic herbicides will become attractive.
What we need, and need soon, is a new herbicide with the qualities of glyphosate. That is to say, one just as safe, with just as broad a spectrum, companioned with a tolerant seed trait. And this time around, some mechanism to delay the emergence of weed tolerance.
Arguably, Monsanto has more expertise in this field than any other organization. If it spins off its entire herbicide business, who will develop the successor to Roundup? And/or the tolerance trait to go with it?
----added text----
Since a spinoff is not in the works, it will be Monsanto at the helm, according to discussions between GMObelus and Monsanto officials.
In fact, Monsanto plans to continue making glyphosate technology part of its business for a long time to come. Longer, actually, than many might have suspected.
The decision to put the Roundup business in a division of its own, Monsanto officials confirm, structures the company in a way that reflects the structure of the market. Though glyphosate sales are tied to seed sales if those seeds carry a resistance trait, the markets for herbicide, and for seed, still move independently.
There are also plans to extend herbicide tolerant crop offerings to allow growers more options for managing weed resistance, by developing crops which combine the glyphosate resistance trait with a dicamba resistance trait. This is the same approach taken with insect-resistant crops that combine, or 'stack', two versions of the Bt trait. While the risk of insects developing resistance to one version of Bt is slight, the odds of developing resistance to two versions simultaneously are astronomical.
Crops which tolerate both glyphosate and dicamba will make it possible to treat fields with a tank mix using both herbicides. The odds of a weed developing resistance to glyphosate may be low--but the odds of developing simultaneous tolerance to dicamba are vanishingly small. The resulting resistance management strategy could extend the usefulness of both herbicides much farther into the future than either would have on its own.
---ends---
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