Drug Company Owns Monsanto and Their Weed Killer Is What Funds GMO Crops!

Submitted by SadInAmerica on Fri, 05/02/2008 - 10:44pm.

Monsanto jumped headfirst into the future five years ago, when it spun off its old-line chemicals business and rechristened itself a "life sciences" company that used biotechnology to develop genetically altered crops.

After investing billions in that vision - some of it to create bioengineered corn, soybeans and other crops, and some to buy large seed companies - Monsanto is prospering. But not because of any proliferation of genetically modified supercrops, which have been widely accepted in the United States but have come under fire in Europe and Japan.

What keeps Monsanto healthy is Roundup, a chemical herbicide developed more than two decades ago. It is the best-selling agricultural chemical product ever, with $2.8 billion in sales last year; it outsells other chemicals five to one.

The growth of Roundup, which accounts for about half of Monsanto's revenue, is the primary reason that the company reported a solid profit in the second quarter, despite the resistance overseas to bioengineered crops and a depressed agriculture economy that has battered other companies.

Monsanto makes 160 million gallons of Roundup herbicide a year. A tillage method, below, involving no weeding or tilling before planting has increased its use.

Monsanto still faces challenges. Roundup's lower price and global dominance mean that it faces difficult growth prospects. And if consumers and regulators here and abroad reject biotech crops, Monsanto and its multi-billion dollar investments would be devastated.

But analysts say the company seems to be positioning Roundup as a hedge against that possibility. And if biotechnology is not dealt a significant blow, Monsanto could become the world's most profitable agriculture company because it would then command 80 percent to 90 percent of its two primary markets - nonselective herbicides and biotechnology seeds.

The combination, analysts say, could lead both product lines to reinforce each other, helping Monsanto's seeds dominate certain crops in the same way Roundup does in herbicides.

Even competitors marvel at the growth and size of Roundup. "This is a blockbuster in an industry where a blockbuster is a $200 million product," said Jerome Peribere, vice president for herbicides at Dow AgroSciences. "In pharmaceuticals, a blockbuster is $1 billion; this is like imagining a $10 to $15 billion product."

That is why analysts project double-digit growth for Monsanto over the next few years. It would be a remarkable turnaround for a company whose profits had been weighed down by huge research costs and by the debt that came with buying seed companies in the 1990's. That debt, about $6 billion, helped push Monsanto into a merger with the Pharmacia Corporation (news/quote) in 1999.

Pharmacia swallowed up Monsanto's drug unit, Searle, and its Celebrex arthritis drug - then spun off Monsanto as a separate company after investors complained that Monsanto would weigh down Pharmacia's profits.

Monsanto's biotechnology seeds are now planted on about 80 million acres worldwide. And Roundup commands 80 percent of the world market in herbicides that do not target specific weeds.

Even more, few competitors are willing to produce a generic version of Roundup, a glyphosate herbicide that kills just about anything green, because Monsanto has protected its market dominance by cutting the price while finding new uses. This built loyalty while reducing the profit that potential competitors could reap by trying to lure away customers.

For example, in 1996 Monsanto began marketing genetically modified crops that were immune to Roundup. The crops, called "Roundup Ready," allow farmers to spray the herbicide on the fields, killing weeds but not the crops.

The company also lowered the retail price of Roundup years before its patent expired in 2000 - dropping it from about $44 a gallon in 1997 to $34 in 1999 to about $28 today. This drove up demand and may have also deterred competitors. At the same time, profits did not suffer; volume gains made up for the price cuts.

"If you look at the period 1994 to 2000, the price decreased 45 percent but our gross profit was up 90 percent," said Hugh Grant, the chief operating officer at Monsanto, which is based here.

Roundup also helped speed the adoption of conservation tillage, a system where farmers do not weed and till the soil before planting; they simply spray weed killer and then plant. Con-till, as it is known, reduces soil erosion, saves fuel and eases wear and tear on farm equipment, not to mention lowering labor costs.

The tillage method is used on about 300 million acres worldwide, and Roundup is used on about two-thirds of those acres.

Monsanto also decided that once its United States patent expired, it would supply its glyphosate molecule to competitors. The drop in the price of Roundup and the size of Monsanto's volume - it produces close to 160 million gallons a year - seemed to deter competitors from building plants because the economics make it difficult to compete.

"They said, `We'll license you the molecule, and you can buy it, repackage it, do whatever you want. Or you can build your own plant.' " said Jeffrey Peck, an analyst at Bear Stearns (news/quote). "Just about every company they offered it to took the deal."

Monsanto extended its advantage by sharing its regulatory clearances with companies that buy the ingredient from Monsanto rather than make it themselves. That sped up government approval.

The world's biggest agricultural seed and chemical company, Syngenta which was formed last year when Novartis) and AstraZeneca combined their agrochemical businesses, has begun to make a glyphosate molecule, but its market share is small. Another competitor, Dow AgroSciences, has set the modest goal of being No. 2 in the market, with 10 percent of glyphosate sales.

Though costly to research and bring to market, biotech seeds generate large profits once they are licensed. This year, Monsanto is expected to bring in about $400 million from its biotech traits - the technology implanted in seeds to make a plant release an insecticide or resist weed killer.

New York Times - David Barboza - August 2, 2001 - posted at http://articles.mercola.com/sites/articles/archive/2001/08/08/

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Submitted by SadInAmerica on Fri, 05/02/2008 - 10:44pm.