--Monsanto is confident it can reach royalty deal to collect on
new seeds
--Company was unable to enforce fees on earlier soybean
seeds
--Monsanto eyes late 2013 seed launch
By Shane Romig
BUENOS AIRES--Agricultural-biotechnology company Monsanto Co.
(MON) is optimistic it will be able to collect royalties in
Argentina from its second generation of genetically modified
soybean seeds despite getting stiffed in the past.
Monsanto aims to start selling the new seeds--which have the
combined traits of resistance to insects and the herbicide
glyphosate--in October 2013, Pablo Vaquero, Monsanto's director of
sustainability and corporate affairs for Latin America south, said
in an interview.
But its plan hinges on reaching a royalty agreement with
farmers, seed merchants and exporters over the course of the next
year, Mr. Vaquero said.
Monsanto is currently running about 80 different seed trials in
Argentina to see if the new seed--Intacta RR2--lives up to the
expected higher yields.
In Brazil, Monsanto's tests of the new seeds have lifted yields
by up to 15%. Argentina's Agriculture Ministry this week said that
kind of yield boost could increase the country's soybean output by
five million metric tons.
The seeds are slated to go on sale in Brazil for the 2012-13
season once China approves imports of soybeans grown from the
seeds, which is expected shortly, Mr. Vaquero said.
The U.S., Brazil, Argentina and Paraguay dominate global soybean
exports, while China is the world's top importer. Demand for
soybeans has surged in recent years for use as animal feed to sate
the world's growing hunger for meat.
Monsanto has been able to enforce royalty rights for its
genetically modified soybeans in all the top-producing nations
except Argentina. The company is shifting its focus to Intacta RR2
now as the U.S. patent on its first generation of soybean seeds
runs out in 2014.
Monsanto failed to obtain a local patent for the soybean seeds
it introduced in Argentina 15 years ago and its efforts to collect
royalties have been foiled by local regulations. Virtually all of
the soybeans grown in Argentina are based on Monsanto's
technology.
However, Argentina is now working on a new seed law to protect
intellectual-property rights for agricultural biotechnology.
Monsanto has a patent for the new seeds in Argentina but, under
local law, farmers don't have to pay royalties on seeds they grow
and hold back for the next planting season.
"We've decided to move forward on a seed law draft, as
corresponds in a country that aspires to be a leader in food
production," Agriculture Minister Norberto Yauhar said in a press
release Tuesday.
"We're looking to protect intellectual property in the
development process," Mr. Yauhar said, adding that the bill will be
sent to Congress for debate in the coming months.
That could be good news for Monsanto.
The new law would seek to clarify who qualifies as a
"small-scale" farmer who can legally reuse seeds from his own crop,
Mr. Vaquero said.
The rest of the users would have to pay the companies that
developed the seed technology.
"We want all farmers to play the same game and not cheat us," he
said.
But Argentines have a long history of flouting attempts to
collect intellectual-property fees on everything from DVDs to
soybeans.
"Controls are very weak, with lots of unlicensed wheat and
soybean seeds sold in unmarked bags each season," Mr. Vaquero said.
"It's not clear how the government is going to control the
protection of technology rights."
With that in mind, Monsanto is working to reach an agreement
with farmers, exporters, and seed merchants to collect royalties
when farmers deliver their grain to market.
A similar system has been working well in neighboring Brazil.
The source of the soy can be checked relatively easily and fees
collected when the beans are delivered to exporters and
processors.
Monsanto's pending introduction of Intacta RR2 comes at a good
time. Farmers in its key South American markets are getting ready
for bumper crops in the upcoming 2012-13 season, thanks to the
heavy rainfall that the El Nino weather phenomenon is expected to
bring.
In addition, Monsanto is a major provider of genetically
modified corn seed and sees major growth opportunities in that
business in Argentina, Paraguay and Uruguay in the coming years,
Mr. Vaquero said.
A devastating drought in the U.S. has boosted grain prices and
made corn a good option in South America. The margins for corn
cultivation are better than those for soybeans right now and many
farmers need to plant corn to rotate crops on their fields, Mr.
Vaquero said.
The U.S. drought has also hit seed production, and many of the
corn seeds U.S. farmers will plant next year will be grown in
Argentina and Chile, he added.
In June, Monsanto said it plans to build a $100 million plant to
produce corn seeds in the heart of Argentina's corn belt in Cordoba
Province. Monsanto already operates a similar plant in Buenos Aires
Province.
Write to Shane Romig at shane.romig@dowjones.com.
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