In a few weeks it is quite likely that Monsanto will disappear
as an independent company, and become part of Bayer. Monsanto has been an
iconic company that drastically changed the plant breeding sector in a manner resembling
the changes brought by Microsoft and Apple in computing and Tesla in cars.
Monsanto will be gone but its products and actions will endure.
Monsanto has its shares of triumphs and controversies.
One of its scientists won the Nobel Prize for developing a chemical used to
treat Parkinson disease and the company supported breakthrough research on
cancer. It introduced the first mass produced LEDs, which drastically reduces
energy use for lights. It invented several important chemicals and even
invented AstroTurf, among others. It also produced DDT (which helped combat
malaria) and Agent Orange and both were tragically misused. Altogether it was a
solid chemical company, but not a dominant player.
In the 1980s its management team recognized the potential of
new knowledge in molecular biology, stemming from the discovery of DNA and gene
transformation technologies, to address pest and disease control – especially
in agriculture. The company changed direction, invested heavily in developing
an excellent research team in biology and life science. One application was
recombinant bovine growth hormone (rBGH) that aims to increase the yield of
milk. This technology was moderately adopted
(<20%) and was sold to Eli Lily. But the main applications were for crop
science. Monsanto obtained the right to agrobacterium that
allows for transfer of DNA between plants, acquired knowledge and skills to
augment its capabilities, and developed the first large scale application of
agricultural biotechnology. Other chemical companies also attempted to develop genetically
modified varieties, but Monsanto was at the head of most of them.
The development of its innovative capacity followed patterns
consistent with the notion of educational
industrial complex. Namely, in addition to developing a strong in-house
research capacity, Monsanto relied on innovation generated at universities by
purchasing both rights to technologies as well as taking over start-ups and
other companies. In particular, beside buying the rights to agrobacterium,
Monsanto took over Agracetus, a company that generated the first transgenic
cotton, soybeans, and other crops, and Calgene, the creator of Flavr Savr tomato, and
others.
The development of new GM technologies was challenging and
expensive. In addition the implementation of new GMO varieties required creating a
new supply chain. GMO technology inserts traits, for example insect
resistance, to existing crop varieties to achieve new, modified varieties.
Insect resistance varieties, for example, serve the same purpose as chemical insecticide,
which are a segment of pesticides. Chemical insecticides are sold through a
network of dealers who then sell to farmers. This network cannot be used to
sell the GM varieties that include the insect control trait. But Monsanto
didn’t have a seed business at first. In order to reach the seed market, it
sold the rights to Roundup Ready soybeans for $450,000 in 1992 and Bt corn
resistant to corn borers to Pioneer for $38 million in 1993. Pioneer made huge
returns on their investment and made Monsanto realize that they needed to have
their own seed business.
Beginning in 1996, they began a series of
acquisitions amounting to $8 billion. They purchased Holden’s Foundations
Seeds (corn), DeKalb (corn), Cargill’s international seed business, Delta and
Pine Land Company (cotton), and Seminis (vegetable and fruit). Altogether, by
2015, they became the biggest supplier of seeds in the world with 26% of the global seed market.
In addition to selling the GM traits through its seed business, Monsanto also licensed the right
to use its traits to other seed companies, who pay a royalty.
Over time, the number of traits that Monsanto developed has
increased; and seed companies now sell varieties that are “stacked”,
meaning they have multiple traits. For example, a seed may include insect control
(Bt) as well as herbicide tolerance (Roundup Ready) traits. [SK1] The
prices of seeds can be decomposed to include the price of the seed (net of the
GM trait) plus a technology fees for the various traits. Furthermore, Monsanto
provides user
contracts, as well as technology
use guides. Farmers are supposed to follow a management program that
includes resistance build-up program and are barred from reuse of seeds or
selling them, among other restrictions. Monsanto considered developing a
“terminator” gene that would render the offspring of transgenic crops
infertile. That would make them equivalent to hybrids, and reduce the risk of
gene flow, but the technology remains in the lab.
Monsanto’s supply chain of GM varieties drastically altered
customs in the seed industry by requiring purchase of seeds and barring reuse
of seeds. In many regions, especially in developing countries, farmers may get
seeds from the public sector and then reuse them. Yet, Monsanto required
farmers to buy seeds and not to reuse them. However, in the United States and
Western Europe, increasingly farmers purchase seeds from dedicated seed
producers every season. In the case of hybrids, that cannot reproduce themselves,
farmers must purchase seeds. The development of a dedicated seed supply sector
that provides high quality seeds is one reason for the huge gap in yields
between developing and developed countries.
By introducing transparent pay for seeds and traits,
Monsanto modernized the seed business and provide incentive to the public
sector to get engaged and provide improved genetic material. There is vast
evidence that GMO varieties tend to increase yields, reduced insecticide
use (while increasing herbicide use), especially in developing countries, as
well as farmer profit. Nevertheless, this new approach angered purists and
caused significant backlash and legal cases
against Monsanto and “GMOs” in general.
Development of the new GM traits and varieties required many
steps and was very costly. Many Monsanto scientists were driven by the belief
that their technologies were beneficial to the environment.[1] Indeed,
innovations like Bt cotton and corn reduced pesticide use and Roundup Ready
crops were important in the introduction of no-tillage technologies that
sequester carbon. However, the technologies encountered strong objections from
environmental groups. These objections stem from concerns about gene flow as
well as unknown environmental and health consequences using biotechnology in
agriculture. Yet Robert Fraley won the World
Food Prize in 2013 with two parents of transgenic crops, research
councils throughout the world found time and again
that biotechnology should be utilized while the risks are being monitored and
controlled, implying that the benefits much outweigh risks and that
biotechnology offers an alternative to more risky and harmful practices, and 119 Nobel Laureates and
thousands of scientists support GMO and Golden Rice. However, activists
continue to oppose
it strongly and develop networks
to oppose it, with Monsanto as the biggest target.
The opposition to Monsanto wasn’t confined to activists. Some
chemical companies lost billions in sales of chemicals that were replaced
by genetics. Their interest was to ban, or at least slow, the introduction of
GM traits to maintain profit and allow time for them to adjust. I have heard
more than once that chemical companies contributed to slow Monsanto’s progress.
When I was a member of the National Research Council’s committee on the future role
of pesticides in US Agriculture, we heard from a Bayer representative who
suggested that GM technologies has very limited potential in the near future
and most of the effort in the US should focus on chemical controls.
Transgenic crops were
introduced in Europe in the 1990s during the Mad Cow disease outbreak that triggered
high levels of mistrust of governments and science. It was associated with
the popularization of the notion of Frankenstein
food. The election of the Bush administration and its decision not to support
the Kyoto Protocol further associated GM technology with an America that is
careless with environmental risk, and cemented the European objection
towards this perceived “American technology.” Demonstrations and protests were
crucial in the battle against GM technology. Activists found that threatening
demonstrations against retail stores were an effective means to prevent
adoption of new GM varieties. Such strategies affected McDonald’s decision not
to use GM potatoes, which led Monsanto to drop this product line.
Much of the battle was in the political arena, starting with the efforts of Jeremy
Rifkin to ban GMO in the US and continuing with heavily financed campaigns
to this day.
These objections resulted in very strong regulations of GM
technologies which increased the cost of developing new varieties and traits,
and limited the application of GM to major crops like corn and soybean. But the
strong regulation might have indirectly assisted Monsanto to some extent
because of the high cost of entry to the industry that reduced competition. In
Europe and many other countries, especially in Africa, regulations basically
banned the production of GM crops there resulting in major monetary and health costs.
In addition to ban GMs, there were recently significant efforts to label GM
foods in a way that would make it less attractive. The political objections to
GM foods led Monsanto to invest millions in
various political campaigns and political activities. These efforts, and
the continuous debate, painted Monsanto
as one of the most hated companies in the world.
At the same time, Monsanto was constantly considered one
of the best places to work. From my encounter with the company, and
speaking with many people, employees believe in the mission and direction of
the company and feel victimized by special interests and lack of information
and appreciation of the radical technologies they produce and its potential for
good. Monsanto’s employees belief in their own way as well as some sense of victimhood
might have contributed to what is perceived
as aggressive behavior. In the last few years, I realized that some within
Monsanto realized that their own behavior might have contributed to negative
attitudes towards their product, and they attempted to become
more friendly and cuddly. I don’t
believe it will work.
The Monsanto employees I met care about the environment and
climate change deeply and believe that they provide appropriate solutions. In
the 1990s, I was part of an EPA White House Task Force on strategies to
implement the Kyoto Protocol and I witnessed how Monsanto contributed to
efforts to include soil carbon sequestration as part of the carbon accounting
in the Kyoto Protocol. Obviously they did it because no-low tillage was a key
strategy to sequester carbon and it relied on its herbicides. But I was
impressed by the knowledge and concern of their employees about climate issues
and efforts to develop strategies to address these issues. A few years later I
was asked to evaluate Monsanto’s research on sustainability, which led to a paper
I contributed to. I realized that Monsanto had a strategy to address climate
change and environmental side effects from agriculture by increased precision,
where a multitude of varieties and other practices are adjusted to specific
agroclimatic conditions taking advantage of information technology and
increasing climatic knowledge. This vision is consistent with a lot of my early
work where I believed that biotechnology and information technologies are
complementary in achieving environmental and efficiency goals in agriculture.
I wasn’t surprised that Monsanto recently bought
Climate Corps and has started to invest in big
data in agriculture. They realize that concerns about climate change, food
security and the new opportunities of the bioeconomy will give rise to
agricultural systems that combine biology and information technology. And they
want to be a major part of this new way of doing things. While GMOs will
continue to be a major part of their business, they realize the political
reality constraining its application. They realize that GM is likely to be used
mostly in feed and fiber, but not food, in the near future. This is a pity
because I believe that GM has a much larger potential to help adaptation to
climate change and food security in the production of vegetables, fruits, and
other food products. But as I see it, Monsanto will take advantage of their big
portfolio of genetic material with new developments in gene editing and other
new biological and precision technologies.
Many of the critics of this vision assume that it requires
large corporate farms. But that is not the case. Monsanto likely benefit more
when agriculture consists of many small farmers that buy its products and
information services, and having large input suppliers (like Apple that
supplies cellphones and John Deere that supplies tractors) doesn’t preclude
having millions, or even billions, of small customers. One assumption that Monsanto
and others have is that some subsistence farmers in developing countries will
be incorporated in the information age and will utilize these technologies,
which will help them adapt to climate change while improving their livelihood.
When we see the cellphone revolution in developing countries, and the millions
of farmers that already agricultural biotechnology in India, we realize it is
not an unrealistic vision.
Despite the troubles and tribulations of Monsanto, the
company has done very well. They almost got eliminated in 2000 when they
restructured, and if we look their stock performance, it’s quite good. Monsanto
realized that some of the limitations their image entails. Their leadership is
getting old and would like to cash out. When Bayer approached them offering
$125/share when the price was around $100/share, they agreed to the deal. Bayer
needs the deal to complement its strength in the agchemical segment and become
a major player in the biotechnology revolution. Perhaps the change of ownership
to European hands may improve the prospects of GMOs in Europe. Now they need
the approval of US government and the EU, which will address issues of market
concentration. This merger is part of the consolidation of the seed and chemical
sectors that sees also a merger of DuPont and Dow as well as the takeover of
Syngenta by ChemChina. Whatever happens to Monsanto, the vision of using modern
technology to enhance agricultural production and address challenges of climate
change will endure.
[1]
For an excellent review of the evolution of the agricultural biotechnology
industry, read Lords
of the Harvest.
[SK1]You
mention above how Bt reduces insecticide use. Some of the criticisms I’ve heard
with HT are the more herbicides. However, given that most varieties these days
are stacked, is the herbicide overuse problem a big deal? Might be worth a
sentence here since that seems to be a common criticism.
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