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More Monsanto Unintended Consequences

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Ishtarmuz’s rebuttal to: Monsanto’s Hugh Grant, CEO of the Year 2010

Ishtarmuz’s rebuttal toMonsanto’s Hugh Grant, CEO of the Year 2010 written by J.P. Donlon in Chief Executive July/August 2010

Recognizing that helping farmers around the world gain access to the best technologies is in everyone’s interest, Hugh Grant has made it central to Monsanto’s strategy to partner with others—governments and NGOs—to improve food security. By J.P. Donlon

To say this is to be totally blind to the history of this company, those whistle blowers that say the CEOs of Monsanto are front men and that they are in no way growing the profits of this company other than by litigation, deceptive public relations, flawed science, and an awesome business model that has doubled the size of the company in a few short years. Since we are talking Monsanto check out the 46 links in this CorporateWatch article.

Few other companies—not even, say, Google—seem to excite such extreme passions. Depending on whom you’re talking to, Monsanto, the agri–biotech company, is either Satan or savior. Not bad for a B–to–B company that, apart from its commercial weed–killer Roundup, is largely unknown to the public. The observation brings a knowing expression to the face of Hugh Grant, a tall, laconic figure who speaks with the soft Glaswegian accent of his native Scotland. Since becoming chairman and CEO in 2003, he has led the $12 billion St. Louis–based company through a series of moves focused on developing products that help farmers grow more crops by using resources more efficiently. Trained as a molecular biologist and agricultural zoologist, Grant and his team have overseen the company double in size. … Under his leadership, total annual average return to shareholders exceeded 27 percent, with net income CAG reaching 23 percent. During this time, Grant increased the company’s R&D investment to more than $2.5 million a day.

You can almost hear the Board saying, “With those numbers, I don’t care how he is doing it. We are responsible to the stockholders. Carry on, whatever it takes, we have too much invested to not carry on.”

… 30 years ago, the typical farmer fed just 25 people. Today a farmer feeds about 130 people and in the next 40 years he will need to feed twice as many. Monsanto’s business of boosting agricultural productivity is at the center of nearly every major issue … feeding the world with fewer resources would be championed.

Except that what is meant here is that all small farmers will be driven out of business and the corporate farms forced to play ball with Monsanto will be the only ones to survive and propagate Monsanto’s monoculture.

The criticism Monsanto encountered when it transformed itself from a chemical to a biotechnology company in the late 1980s centers on its strategy of modifying the genes of corn, soybeans and cotton. The fact that civilization has been selecting for genetic traits for 6,000 years was dismissed by critics who argued that genetic modification of plant seeds would lead to “Frankenfood.”

Taking the genes of one species, splicing them into a virus, inserting them into a bacteria, then shooting them into another genome with a gene gun is not the same as selecting for genetic traits from a single species as was done for the last 6000 years.  They have no idea of the results of this genetic modification process other than that the plants that show the desired traits are marketable because they have rigged the game at every level of the process.

Opposition to crop biotech has somewhat abated, as farmers around the world have voted with their plows. It’s easy to understand why. … In the U.S., about three–fourths of the corn and soybeans is grown with seeds containing Monsanto’s technology.

Yes, we understand why, as many farmers as they can coerce have been left no economic alternative after they have become addicted to the pesticides.

In fact, Monsanto now has the opposite problem, in that its success in crop biotechnology has drawn the attention of Department of Justice antitrust chief Christine Varney. Nor is the sector short of aggressive competitors such as Syngenta, DuPont, and BASF, among others. (Monsanto broadly licenses its technology, even to competitors.)

Yes, all the broad licences were done under threat of antitrust lawsuits.  This was not the first time these questions have been asked.

The issue of agricultural resource constraints, which promises to become more acute, lies at the core of Grant’s strategy. Currently 70 percent of fresh water in the U.S. is used for agriculture, with the rest used for drinking and personal needs. … Recently CE’s J.P. Donlon caught up with the 2010 Chief Executive of the Year and his team in St. Louis to explore their focus on sustainable agriculture.

Everyone that believes that Monsanto is full of eleemosynary intent and just want to feed the world, save our drinking water and not provide the world with a premiere sustainable, yet unethical, business model, please raise your hand.

Helping the world feed itself seems innocuous—even admirable—but in our sustainability–obsessed world it’s become controversial. When you took this job in 2003, did you understand what you were up against?

Agriculture finds itself in the middle of discussions on global policy issues concerning food, global warming and water, among others. And because Monsanto is in the middle of the agricultural source of all this and has relevance to these larger global concerns, it is at the center of strong visceral reactions. If it were not Monsanto, it would be some other company.

With proprietary drought resistant seeds, who has the most likely to benefit from global warming? Who might fund studies to deny it happening?

In our lifetime…there will be … the equivalent of two more Chinas. … How will we feed them and how will they have enough water? … So the challenge is: How do we produce more on fewer acres of arable land?

Improving productivity is the only answer. … We are among those who see a tremendous opportunity in trying to shift the slope of the productivity curve in increasing yields of key crops. That’s what our scientists—about 3,500 researchers, of which one–fourth are PhDs—wake up every morning thinking about.

Yes, and how open, independent is their “peer” reviewed research?

How will Monsanto’s efforts move the needle on a challenge of this magnitude?

It doesn’t take much imagination to suggest they insert a toxoplasma gondii gene into their substantially equivalent seeds and make us not fear GMOs.

We’ve moved the needle a good bit already. We’ve improved the base seed itself. Civilization has been improving traits for thousands of years. We’re getting there quicker by improving the genetics. It’s like breeding Thoroughbred racehorses. We’ve just advanced the capacity to yieldmore.

Yes, when was the last time a thoroughbred horse had a daffodil spliced into its genes?

We spend $1 billion a year on R&D, and half of that goes to improving the genetics of that seed. For example, we’re building genetic street maps …

Maybe you should read my road trip article about following your GPS and computers without using your own good sense? The map is not the territory.

The other 50 cents of the R&D dollar goes to biotechnology. This may involve, for example, the fight against weeds and bugs. Further into the future, the focus will increasingly be on water usage. …

So we should gargle away all our water with just your pesticide producing only your monoculture, when is not even clear it will actually do what you are saying after a few crop generations and by then it may be too late?

So is drought tolerance the equivalent of your Lipitor or Viagra?

It has the capacity to be a blockbuster, to use your pharmaceutical example. We haven’t made any projections, but it would be in the $1 billion–plus range.

The learning from the pharmaceutical industry is to work out how to share one’s product at the early stage with people who aren’t able to pay you for it….

Yes, get them hooked and start charging.  Also you learned that pharmaceutical R& D out performed chemical company R &D four to one for that very reason.

Spending $1 billion on R&D, you have considerable intellectual property to protect, and, considering that you charge a premium for seeds, how do you convince farmers they’re worth the extra cost?

Simple. You have to deliver yield on the farm. The sophistication of the grower has increased enormously. The grower is running a combine, a John Deere equipped with a computer with a satellite uplink, through his fields that gives him accurate yield data on every square yard. This is the norm, not the exception. …

All the farmers that will be left will be so equipped. The small farmers will be gone. Let me see, there are over 40 million farmers in China were displaced from their land in 2005, there were about 2 million farmers in the USA in the 1990s, but the John Deere GPS up-linked tractors sold around the world are just over 80,000 in 2008. Sure these high tech tractors are the norm. I would bet half the world’s farmers don’t even own a tractor, but then Monsanto defines a farmer differently than governments.  Are Monsanto’s other numbers so misinformed? Or has that many small farmers around the world already been displaced by corporate farms encouraged by the Monsanto monoculture?

Yes, but as Intel’s Andy Grove used to point out, one’s technology lead is never permanent. Syngenta, for example, is introducing a drought–tolerant product. How do you maintain a lead and a price premium?

That is easy.  Our dirty tricks department makes sure they are killed in key markets, but that would be wrong. [Too bad that was accidently deleted from tape of the interview (see watergate tapes).]

That’s the key question, because it’s an increasingly crowded and competitive space. That’s the nature of this business. Growers are discerning customers, focused on functionality. … Also, we’re working on corn that uses nitrogen more efficiently, giving farmers more choices.

As competitive as the five media giants?

Products that deliver consistently on farms will provide the competitive edge. Despite an increasingly crowded field, our products yield better. The increment of yield translates into premium price position. It’s that basic.

An asset manager at an investment fund based nearby was horrified to learn that Monsanto was chosen as this year’s honoree. She didn’t use the word “evil,” but it was clear that was what she meant when referring to the company prohibiting farmers from reusing the seeds it sells. Asked about Microsoft or HP penalizing those who violate the terms–of– use of their products, she rejected the analogy, saying that while North American farmers can afford to buy the seed each planting season, South American farmers cannot. To her mind, and to those other highly educated urban professionals we encountered, this practice makes Monsanto yet another example of a heavy–handed U.S. multinational bullying indigent peasants.

The romance with agriculture is directly proportional to the distance that you are from it. …

An honest real world statement, but a corollary to that would be that the romance of the scientific results that you tout as a solution is also more promising the more distance you have from the real world results.

We have more farmers growing our biotech cotton in India than we have in America, including the entire Mississippi delta and all of Texas. The reason is that it works better. It yields more and costs less. …

That is why they were committing suicide en mass by drinking your pesticide.

Cumulatively, no more than two billion acres of these crops have been planted. The first billion acres took 10 years. The second billion took three years. How is that possible? It’s because a big piece of the second billion is smallholder agriculture—the very people your Greenwich fund manager thinks are oppressed. They are rushing towards it. Brazil, Argentina and Mexico are stepping up their use of insect–protected cotton, not because of Monsanto, but because the economics dictate it.

It is not like your company ever bribed government officials where you couldn’t get your people installed into government postions.

There will always be people who will not be persuaded by the facts, but to the vast middle ground we’re seeing a more constructive dialogue. The fact is that farmers are ahead of the critics. They look around and see the reality—that there will be more people on the planet to feed and clothe. They aren’t persuaded by some government’s ag policy or by any company’s clever marketing.

Yeah right, if your company could produce this profit by having these farmers sell pet rocks, then you would do that and so would the farmers, to feed their families.

Describe this company five years from now. How will it be different?

I’m always worried about dramatic sharp turns. I call it the Jetsons effect, where it’s assumed everyone is traveling in personal spaceships. … It will be a business focused exclusively on biology, sitting comfortably in the Fortune 100.

Large risks can lead to large profits or large failures.  You can ignore the risks at your peril and, unfortunately, ours too.

By 2016, we’ll have commercialized our first drought–tolerant products. We’ll be seeing the first of those products in the hands of growers in sub–Saharan Africa. And we’ll have made significant progress on our yield genes. We will have made significant progress in the early ramp towards doubling yields in corn, soy and probably cotton. Five years is only four spring plantings from now.

The Monsanto Board of Directors

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