Agribusinesses expect big yield in fields and stocks

BASEL, Switzerland -- For years, the agribusiness industry has ever so quietly been making new seeds to turn everyday crops -- corn, soybeans, canola, cotton, vegetables -- into Olympic farmland athletes. These genetically modified crops are being engineered to grow bigger, faster, stronger. They can resist certain herbicides and pests and may soon withstand drought.

While skeptics have denounced these GM crops as "Frankenfoods" endangering humanity and nature as we know it, agribusiness has come out of the barn and is exploding in value, with sales of some $60 billion a year. Now, soaring food prices and mounting shortages are setting the stage for an even stronger agribusiness boom.

Growth has been so phenomenal that the two biggest independent names in the industry, Monsanto Co. of St. Louis and Syngenta AG of Basel, Switzerland, did not even exist as pure agribusiness companies until early in this decade. The two rivals' combined market value exceeds $100 billion. Between them, they control a third of the market for seeds, pesticides and fertilizers.

"I clearly see the path to doubling our gross profit by 2012," says Brett Begemann, Monsanto's global head of commercial operations in St. Louis.

GM seeds are already ubiquitous in North and South America and some parts of Asia. Hawaiians grow a virus-resistant GM papaya. American farmers grow "heart healthy" soybeans with a low trans-fat content. The R&D pipeline includes rice pumped up with vitamin A and oilseeds with enhanced omega-3 fatty acids. Robert Shapiro, Monsanto's boss in the 1990s, called GM seeds "the single most successful introduction of technology in the history of agriculture, including the plow."

Whether the hype around plant technology will match the reality is unclear. The first generation of GM crops was a dud in terms of yield improvement. Monsanto and Syngenta admit as much -- crops designed for herbicide and bug resistance, they say, have been the priority.

The newest generation will focus on yield improvement. Monsanto vows to use genetic engineering to double the yield of its corn, soy and cotton products by 2030. Seeds are just part of the story. Monsanto and Syngenta do a booming business in herbicides, fungicides, insecticides and other "crop protection" sprays and seed coatings.

The companies bill their products as the panacea to the spiking commodities prices and food shortages that have caused riots in dozens of countries and triggered June's United Nations food summit in Rome.

The growth of genetically modified crops has been nothing short of phenomenal. As recently as 1990, no GM crops grew on U.S. soil. Today, they are everywhere, at least in North and South America.

In 2007, 91 percent of U.S. soybeans and 73 percent of corn were GM, according to the U.S. Department of Agriculture. The International Service for the Acquisition of Agri-Biotech Applications, a nonprofit group promoting biotech seed use in developing countries, says 12 million farmers in 23 countries grew GM crops.

As GM crops expand, so do the agribusiness giants' fortunes. Last year, Syngenta's sales of new products were $1.2 billion, up 11 percent from the previous year and 367 per cent from 2002. Sales of both conventional and GM seeds last year grew 12 percent to $2 billion.

Monsanto's growth has been even more impressive. Between 2005 and 2007, sales grew 22 percent to $8.6 billion, while profit rose almost fourfold to $1 billion. Fuelled by soaring global demand for grain, its profit increased 42 percent to $811 million in the quarter ending May 31.

Monsanto has been a star on the New York Stock Exchange. Its share price is up sevenfold since 2004. Its market value is $75 billion, making it the global agribusiness leader. Syngenta has climbed fourfold since the same year, giving it a value of $32-billion.

The spoils are so rich that increasingly powerful competitors are challenging the two biggest players' market power. Rivals include Pioneer Hi-Bred International, the seeds division of chemicals giant E.I. du Pont de Nemours & Co.; Dow Chemicals' subsidiary DowAgrosciences; and the agribusiness units of two German industrial giants, Bayer and BASF.

These companies' new fortunes were spurred by two decades of waning investment in agriculture after the success of the Green Revolution. That started in the mid-1940s with American agronomist and Nobel laureate Norman Borlaug, who used plant technology, fertilizers and irrigation to turn Mexico from a wheat importer into a wheat exporter. Such expertise dramatically increased agricultural productivity around the world, especially in India and other parts of Asia by the 1990s.

Similar advances, meanwhile, were creating food gluts in North America and Europe. Silos were stuffed with unsold grain. In Europe, "wine lakes" and "butter mountains" developed. As food costs sank, the World Bank and its like lost the desire to fund agricultural development in poor countries.

"Agriculture almost completely disappeared from the agenda," says Peter Hazell, an agricultural development economist and former economist with both the World Bank and the International Food Policy Research Institute. "It became a dirty word."

In both real (inflation-adjusted) and nominal terms, food prices sank between 1975 and 2001. Then, prices reversed course. The problem wasn't just soaring populations, drought in Australia, Asia's new taste for protein-rich diets and turning food such as corn into biofuels. Growth in yields around the world fell dramatically, after two decades of waning agricultural investment.

The World Bank now bemoans the lack of investment and vows to reverse course. "This is not a natural catastrophe," bank president Robert Zoellick said at the food summit. "It is man-made and can be fixed by us.... Investments in farmers, in agribusiness and in agricultural research could triple yields."

The big agribusiness companies pour billions a year into research and development to boost yields and reduce pesticide use. Monsanto and Syngenta combined spend more than $1.5 billion a year on R&D, much of it on GM and hybrid seeds.

Monsanto can claim the most experience in GM seeds: In 1981, it created a molecular biology group and produced a genetically modified plant cell the next year.

But its best-known product is Roundup, the top-selling weed killer. One problem: Roundup kills crops as well as weeds. So Monsanto developed new seeds, genetically modified to protect themselves from the herbicide. In 1996, the first generation "Roundup Ready" soybeans and canola emerged from the lab. Two years later, Roundup Ready corn hit the market.

Monsanto launched Vistive, its low trans-fat soybean, in 2005. It also produces rBST , an artificial growth hormone that boosts milk production in cows (it has not been approved in Canada or the EU) and is the leading producer of GM corn, cotton and oilseeds.

Now, adding multiple genetic characteristics or "stacks" are the name of the game. The term refers to seeds designed with a combination of two or more traits. Take Monsanto's "triple-stack" GM corn: The seed protects the plant from corn borer caterpillars above the ground and rootworm below and is Roundup Ready. In 2010,SmartStax -- a super-stacked corn seed with eight different herbicide tolerance and insect protection genes -- will go into commercial production.

The next frontiers are drought tolerance and nitrogen utilization. The first would allow crops such as corn to grow in water-short or drought-prone areas. Monsanto expects such seeds to be ready for commercial sale in 2012. The second would allow plants to absorb nitrogen more efficiently.

The goal is to bring down the cost of fertilizer use. American corn farmers alone spent more than $3 billion a year on nitrogen fertilizers, and the corn absorbs only half of what they spread.

Syngenta is well ahead of Monsanto in "seed treatments," in which the seed's outer layer is coated with an insecticide or fungicide. Syngenta's head of business development, Robert Berendes, said the coatings reduce damage to seed just after planting. Coated seeds germinate at a rate of 95 percent, compared with 10 percent to 60 percent for untreated, low-quality seeds. "Treated seeds are like an insurance policy," he said.

Meanwhile, food safety groups and some scientist and nutritionists are telling the GM companies to slow down. These are, after all, new life forms, in which genetic material from one organism is inserted into the genetic code of another.

Bill Freese, a science policy analyst for the Center for Food Safety in Washington, worries about the alacrity with which GM foods have been approved, despite the lack of long-term research on potential risks to human and animal health, plant life and the environment.

Congress has yet to pass a single law to govern GM foods, he said, and with eight federal agencies involved in the food supply, the regulatory process "is haphazard."

Neither company seems concerned about a regulatory GM clampdown. If anything, GM crops are set to soar. The chairman of the European Union Parliament's agriculture committee recently said high food prices, climate change and the rush to biofuels may dilute Europe's resistance to GM crops. The United Nations has warned that big trouble looms unless food production rises by half. And the world's population is set to swell by another 3 billion people.

(Distributed by Scripps Howard News Service, www.scrippsnews.com.)