Last week, business leaders came together in DC to urge members of Congress to join key U.S. trading partners and pass mandatory labeling of genetically engineered ingredients in our foods.
As expected, the founders of Stonyfield Yogurt, Ben and Jerry’s and leaders from other food companies were there. But so was Rose Marcario, the CEO of Patagonia, Inc. So what do fleece, outdoor apparel and genetically engineered foods have in common?
In the article below, Patagonia’s CEO gives us her take on the importance of labeling GMOs and countering the biochemical lobby’s attempts to block the basic human right to know what is in our foods.
The answer, he said: “Not enough.” And neither does anyone else. In the proliferation of GMOs, Yvon saw a serious threat to wildness and biodiversity.
More than 10 years later, the prevalence of GMOs in everyday food products has risen sharply—but basic consumer awareness remains low.
An alarming bill before Congress aims to keep it that way. The Safe and Accurate Food Labeling Act of 2014 (H.R. 4432) will remove any requirements for manufacturers to label foods containing GMOs. Even the misleading name of the bill suggests an intention to leave us in the dark.
We all have a right to know what’s in our food. The manufacturers of GMO seeds maintain that GMO corn and soy, found in many everyday food products, are safe. But if they are safe, why not label them?
Currently, 64 countries around the world require labeling of foods containing GMOs. Most other developed countries—including 28 nations in the European Union, as well as Japan, Australia, Brazil, Russia and China—require labeling.
Yet, in the United States, various food companies joined together to sue the state of Vermont, the first state to pass legislation requiring labeling of GMO food. (Last month, a district judge ruled in favor of labeling GMO food.)
Sometimes a new technology puts us up against an edge that’s hard to see, feel or even define. New technologies, like genetically engineered food, should be labeled, so you can decide whether you want to risk ingesting them.
That seems like common sense to us—so it’s not clear why there is so much resistance to labeling GMOs. Among other arguments, large corporations pushing against labeling say the cost of new labels will be great and passed along to the consumer. But an independent study has shown this is unlikely as manufacturers routinely update labels for marketing reasons.
Further, we have a good, time-tested alternative to GMOs on a global scale: organic farming. Modern organic farming can be highly productive—as good as conventional systems but safer and more sustainable. It can produce high yields from small acreage through the use of locally adapted plants, intercropping, improved nutrient recycling and new techniques to minimize leaching, soil erosion and water consumption.
Claims that genetically engineered seeds will provide significant increases in agricultural production worldwide are probably true—but only in the very short term. In a comparison of organic and conventional yields, Rodale Institute discovered that after an initial decline in yields during the first few years of transition, the organic system soon rebounded to match or surpass the conventional system.
Organic farming puts food on the table (and clothing on our backs) without poisoning the earth.
Patagonia switched to organic cotton in 1996 because we found out how many pesticides are used in growing conventional cotton. In our new food line, Patagonia Provisions, we only use organic ingredients.
Business is responding with positive steps forward: In the last six months, several food and restaurant businesses have announced plans to reformulate products to eliminate artificial ingredients, including GMOs.
But even if people don’t buy organic, a majority say they want to know what’s in the food they eat. We should be informed and make our own choices about what we feed our families and ourselves.
So, as a clothing company that recently got into the food business, we believe it would be irresponsible not to push hard for transparency and other imperatives that will shape our ability to keep the planet and all its inhabitants alive and healthy in the future.
I was proud to join with other business leaders on May 20 in Washington, D.C., to talk to lawmakers about the critical need for transparency in food labeling. I encourage you to visit JustLabelIt.org to learn more about how to protect your right to know.
As more and more leaders begin to speak to the need to label these products, it prompts the question, yet again: with 60% of the world’s population already enjoying this transparency, why have Americans been kept in the dark?
The decision of the Chipotle restaurant chain to make its product lines GMO-free is not most people’s idea of a world-historic event. Especially since Chipotle, by US standards, is not a huge operation. A clear sign that the move is significant, however, is that Chipotle’s decision was met with a tidal-wave of establishment media abuse. Chipotle has been called irresponsible, anti-science, irrational, and much more by the Washington Post, Time Magazine, the Chicago Tribune, the LA Times, and many others. A business deciding to give consumers what they want was surely never so contentious.
The media lynching of Chipotle has an explanation that is important to the future of GMOs.
The media lynching of Chipotle has an explanation that is important to the future of GMOs. The cause of it is that there has long been an incipient crack in the solid public front that the food industry has presented on the GMO issue. The crack originates from the fact that while agribusiness sees GMOs as central to their business future, the brand-oriented and customer-sensitive ends of the food supply chain do not.
The brands who sell to the public, such as Nestle, Coca-Cola, Kraft, etc., are therefore much less committed to GMOs. They have gone along with their use, probably because they wish to maintain good relations with agribusiness, who are their allies and their suppliers. Possibly also they see a potential for novel products in a GMO future.
However, over the last five years, as the reputation of GMOs has come under increasing pressure in the US, the cost to food brands of ignoring the growing consumer demand for GMO-free products has increased. They might not say so in public, but the sellers of top brands have little incentive to take the flack for selling GMOs.
From this perspective, the significance of the Chipotle move becomes clear. If Chipotle can gain market share and prestige, or charge higher prices, from selling non-GMO products and give (especially young) consumers what they want, it puts traditional vendors of fast and processed food products in an invidious position. Kraft and MacDonalds, and their traditional rivals can hardly be left on the sidelines selling outmoded products to a shrinking market. They will not last long.
MacDonald’s already appears to be in trouble, and it too sees the solution as moving to more up-market and healthier products. For these much bigger players, a race to match Chipotle and get GMOs out of their product lines, is a strong possibility. That may not be so easy, in the short term, but for agribusiness titans who have backed GMOs, like Monsanto, Dupont, Bayer and Syngenta; a race to be GMO-free is the ultimate nightmare scenario.
Until Chipotle’s announcement, such considerations were all behind the scenes. But all of a sudden this split has spilled out into the food media. On May 8th, Hain Celestial told The Food Navigator that:
“We sell organic products…gluten-free products and…natural products. [But] where the big, big demand is, is GMO-free.”
According to the article, unlike Heinz, Kraft, and many others, Hain Celestial is actively seeking to meet this demand. Within the food industry, important decisions, for and against GMOs, are taking place.
Why the pressure to remove GMOs will grow
The other factor in all this turmoil is that the GMO technology wheel has not stopped turning. New GMO products are coming on stream that will likely make crop biotechnology even less popular than it is now. This will further ramp up the pressure on brands and stores to go GMO-free. There are several contributory factors.
The first issue follows from the recent US approvals of GMO crops resistant to the herbicides 2,4-D and Dicamba. These traits are billed as replacements for Roundup-resistant traits whose effectiveness has declined due to the spread of weeds resistant to Roundup (Glyphosate).
The causes of the problem, however, lie in the technology itself. The introduction of Roundup-resistant traits in corn and soybeans led to increasing Roundup use by farmers (Benbrook 2012). Increasing Roundup use led to weed resistance, which led to further Roundup use, as farmers increased applications and dosages. This translated into escalated ecological damage and increasing residue levels in food. Roundup is now found in GMO soybeans intended for food use at levels that even Monsanto used to call “extreme” (Bøhn et al. 2014).
The two new herbicide-resistance traits are set to recapitulate this same story of increasing agrochemical use. But they will also amplify it significantly,
The specifics are worth considering. First, the spraying of 2,4-D and Dicamba on the newer herbicide-resistant crops will not eliminate the need for Roundup, whose use will not decline (see Figure).
Predicted herbicide use to 2025 (Mortensen et al 2012)
That is because, unlike Roundup, neither 2,4-D nor Dicamba are broad-spectrum herbicides. They will have to be sprayed together with Roundup, or with each other (or all of them together) to kill all weeds. This vital fact has not been widely appreciated.
Confirmation comes from the companies themselves. Monsanto is stacking (i.e. combining) Dicamba resistance with Roundup resistance in its Xtend crops and Dow is stacking 2,4-D resistance with Roundup resistance in its Enlist range. (Notably, resistance to other herbicides, such as glufosinate, are being stacked in all these GMO crops too.)
The second issue is that the combined spraying of 2,4-D and Dicamba and Roundup, will only temporarily ease the weed resistance issues faced by farmers. In the medium and longer terms, they will compound the problems. That is because new herbicide-resistant weeds will surely evolve. In fact, Dicamba-resistant and 2,4-D-resistant weeds already exist. Their spread, and the evolution of new ones, can be guaranteed (Mortensen et al 2012). This will bring greater profits for herbicide manufacturers, but it will also bring greater PR problems for GMOs and the food industry. GMO soybeans and corn will likely soon have “extreme levels” of at least three different herbicides, all of them with dubious safety records (Schinasi and Leon 2014).
The first time round, Monsanto and Syngenta’s PR snow-jobs successfully obscured this, not just from the general public, but even within agronomy. But it is unlikely they will be able to do so a second time. 2,4-D and Dicamba-resistant GMOs are thus a PR disaster waiting to happen.
A pipeline full of problems: risk and perception
The longer term problem for GMOs is that, despite extravagant claims, their product pipeline is not bulging with promising ideas. Mostly, it is more of the same: herbicide resistance and insect resistance.
The most revolutionary and innovative part of that pipeline is a technology and not a trait. Many products in the GMO pipeline are made using RNA interference technologies that rely on double-stranded RNAs (dsRNAs). dsRNA is a technology with two problems. One is that products made with it (such as the “Arctic” Apple, the “Innate” Potato, and Monsanto’s “Vistive Gold” Soybeans) are unproven in the field. Like its vanguard, a Brazilian virus-resistant bean, they may never work under actual farming conditions.
But if they do work, there is a clear problem with their safety which is explained in detail here (pdf).
In outline, the problem is this: the long dsRNA molecules needed for RNA interference were rejected long ago as being too hazardous for routine medical use (Anonymous, 1969). The scientific literature even calls them “toxins”, as in this paper title from 1969: Absher M., and Stinebring W. (1969) Toxic properties of a synthetic double-stranded RNA. Nature223: 715-717. (not online)
As further evidence of this, long dsRNAs are now used in medicine to cause autoimmune disorders in mice, in order to study these disorders (Okada et al 2005).
The Absher and Stinebring paper comes from a body of research built up many years ago, but its essential findings have been confirmed and extended by more modern research. We now know why dsRNAs cause harm. They trigger destructive anti-viral defence pathways in mammals and other vertebrates and there is a field of specialist research devoted to showing precisely how this damages individual cells, whole tissues, and results in auto-immune disease in mice (Karpala et al. 2005).
The conclusion therefore, is that dsRNAs that are apparently indistinguishable from those produced in, for example, the Arctic apple and Monsanto’s Vistive Gold Soybean, have strong negative effects on vertebrate animals (but not plants). These vertebrate effects are found even at low doses. Consumers are vertebrate animals. They may not appreciate the thought that their healthy fats and forever apples also contain proven toxins. And on a business front, consumer brands will not relish defending dsRNA technology once they understand the reality. They may not wish to find themselves defending the indefensible.
The bottom line is this. Either dsRNAs will sicken or kill people, or, they will give opponents of biotechnology plenty of ammunition. The scientific evidence, as it currently stands, suggests they will do both. dsRNAs, therefore, are a potentially huge liability.
The last pipeline problem stems from the first two. The agbiotech industry has long held out the prospect of “consumer benefits” from GMOs. Consumer benefits (in the case of food) are most likely to be health benefits (improved nutrition, altered fat composition, etc.). The problem is that the demographic of health-conscious consumers no doubt overlaps significantly with the demographic of those most wary of GMOs. Show a consumer a “healthy GMO” and they are likely to show you an oxymoron. The likely health market in the US for customers willing to pay more for a GMO has probably evaporated in the last few years as GMOs have become a hot public issue.
The end-game for GMOs?
Monsanto and its allies have steadily lost ground in a world of peer-to-peer communication. GMOs have become a liability, despite their best efforts.
The traditional chemical industry approach to such a problem is a familiar repertoire of intimidation and public relations. Fifty years ago, the chemical industry outwitted and outmanoeuvered environmentalists after the death of Rachel Carson (see the books Toxic Sludge is Good for You and Trust Us We’re Experts). But that was before email, open access scientific publication, and the internet. Monsanto and its allies have steadily lost ground in a world of peer-to-peer communication. GMOs have become a liability, despite their best efforts.
The historic situation is this: in any country, public acceptance of GMOs has always been based on lack of awareness of their existence. Once that ignorance evaporates and the scientific and social realities start to be discussed, ignorance cannot be reinstated. From then on the situation moves into a different, and much more difficult phase for the defenders of GMOs.
Nevertheless, in the US, those defenders have not yet given up. Anyone who keeps up with GMOs in the media knows that the public is being subjected to an unrelenting and concerted global blitzkrieg.
Pro-GMO advocates and paid-for journalists, presumably financed by the life-science industry, sometimes fronted by non-profits such as the Bill and Melinda Gates Foundation, are being given acres of prominent space to make their case. Liberal media outlets such as the New York Times, the National Geographic, The New Yorker, Grist magazine, the Observer newspaper, and any others who will have them (which is most) have been deployed to spread its memes. Cornell University has meanwhile received a $5.6 million grant by the Gates Foundation to “depolarize” negative GMO publicity.
But so far there is little sign that the growth of anti-GMO sentiment in Monsanto’s home (US) market can be halted. The decision by Chipotle is certainly not an indication of faith that it can.
For Monsanto and GMOs the situation suddenly looks ominous. Chipotle may well represent the beginnings of a market swing of historic proportions. GMOs may be relegated to cattle-feed status, or even oblivion, in the USA. And if GMOs fail in the US, they are likely to fail elsewhere.
GMO roll-outs in other countries have relied on three things: the deep pockets of agribusinesses based in the United States, their political connections, and the notion that GMOs represent “progress.” If those three disappear in the United States, the power to force open foreign markets will disappear too. The GMO era might suddenly be over.
In October 2014, I interviewed Thierry Vrain, Ph.D. for the Colordado Right to Know GMO Labeling campaign. Dr. Vrain is a former soil biologist and genetic scientist who now speaks out against the risks of genetically engineered foods. Dr. Vrain’s career has spanned the full range of agriculture—from being a proponent of “chemical” agriculture and genetic engineering to being an advocate for organic farming and an opponent of GMOs.
While the video was originally done for the Colorado Right to Know Campaign, it bears even more relevance today since glyphosate has now been labeled as a probable carcinogen by the World Health Organization.
The result is a deeper understanding for us of just how pervasive and dangerous glyphosate, the key component of Monsanto’s RoundUp, is to human and animal health. Monsanto’s sales of RoundUp have exploded over the years since the introduction of genetically altered seeds designed designed to withstand the ravages of this dangerous chemical.
Monsanto’s claims that glyphosate itself poses no danger to human health are put into sharp focus by this video.
The world’s most widely-used herbicide, glyphosate, has been in the headlines a lot lately. It’s not good news for its manufacturer, Monsanto, who is currently trying to ink a deal with Syngenta.
Glyphosate is used in Roundup, a weed killer used to treat Monsanto’s Roundup Ready crops, crops that have been genetically engineered to withstand the synthetic chemical. The chemical company is now facing headwinds, as countries issue bans on the product, restrict its use after the World Health Organization declared it a “probable carcinogen” and halt aerial spraying.
Monsanto continues to face headwinds, not only in the field but in financing: the company was recently downgraded amid earnings disappointments and concerns around its capital structure after a series of debt financings were used for share buybacks.
A quick wrap up of the headlines around this controversial product shows that it may be on the verge of changing from an icon into a relic.
According to National Geographic, “introduced commercially by Monsanto in 1974, glyphosate kills weeds by blocking proteins essential to plant growth…more than 1.4 billion pounds (are) applied per year. Its use skyrocketed after seeds were genetically engineered to tolerate the chemical…. Between 1987 and 2012, annual U.S. farm use grew from less than 11 million pounds to nearly 300 million pounds.
If the concerns around glyphosate prove to be true, it represents a huge liability for the company.
Is Monsanto looking to divest of its glyphosate division through a Syngenta acquisition? Only time will tell, but this is what they are currently up against:
Last month, an international agency declared glyphosate, the primary ingredient in the popular product Roundup, a “probable human carcinogen.”
Glyphosate is not included in the U.S. government’s testing of food for pesticide residues or the monitoring of chemicals in human blood and tissues.
In Europe, there are similar concerns: “If one of the world’s wealthiest nations (Germany) does not have sufficient resources to conduct its own independent evaluations of toxicological evidence we might well ask what are the practices in regulatory institutions elsewhere?”
There is no information on how much people are exposed to from using it in their yards, living near farms or eating foods from treated fields.
Glyphosate was found in about 70 percent of rainfall samples.
90 percent of 300 soybean samples contained traces of glyphosate.
The weed killer also has made recent headlines for its widespread use on genetically modified seeds and research that links it to antibiotics resistance and hormone disruption.
Columbia President Calls for Suspension of Aerial Spraying of Glyphosate
German Retail Giant Removes Glyphosate (Monsanto Roundup) from 350 Stores
These are just the headlines from the last few weeks. In October 2014, Monsanto said on an earnings’ call that they anticipated some “headwinds” when it came to glyphosate and their Roundup product line.
Large food companies are keeping moms in the dark by funding efforts against mandatory GMO labeling. Without labeling, moms can’t know what’s in the food we feed our kids. Honesty brings transparency. Labeling GMOs, the way that they are labeled in 64 countries around the world including for all of our key trading partners, is honest. These ingredients are new to our food supply, patented by the United States Patent and Trademark Office for their novelty, and have never before existed in our food.
Pro-labeling does not mean that we are anti-GMO. It means that we are for transparency, for more science on these new foods, for the freedom to choose what we feed our families.
We want to know more about these new products, how they work, how they affect our loved ones. Labels provide that information, not just for moms, but for everyone trying to navigate the changing landscape of food and the changing health of the people that we love.
Carl Sagan said, “Extraordinary claims require extraordinary evidence.” Extraordinary love will bring about this change, this need for labeling, for more evidence as to how these products are impacting our families, so please watch and share the video below.
Biotech companies like Monsanto have generated a myth that GMO crops are necessary to feed the rapidly growing world population. It’s a brilliant marketing platform built around their patented technology, but research has proven that we already have all the necessary technology to double food access in a way that is safe and better for the environment and all of our health.
The chief causes of global hunger today are poverty and small farmers’ lack of access to basic resources such as fertilizers and roads to market. So why do Big Ag and biotech companies keep insisting that the solution to meeting the demand for food is investment in their genetically engineered seeds?
Investing in infrastructure in developing countries would significantly reduce food waste. About a third of the food grown in developing countries is lost due to lack of storage or inability to get it to market. Improving roads, transportation and storage facilities is crucial to reducing waste and increasing the incomes of poor, small farmers.
On top of that, a recent case study in Africa found that crops that were crossbred for drought tolerance using traditional techniques improved yields 30 percentmore than GE varieties.
Given that creating just one genetically engineered crop variety can cost upwards of $130 million, you’d think Big Ag companies would invest in strategies that have been proven to work and less on GMOs that may not even increase crop yields. But what corporations really care about is their bottom line, patenting these inventions, engineering them to be used in conjunction with a portfolio of their synthetic chemical products, in an effort to increase their profits, feeding shareholder return, not feeding a hungry world.
This short video walks you through the claims and through the solutions.
Lower commodity prices and slower growth are forcing the agrochemical industry into M&A talks, according to Bloomberg.
Monsanto has approached Syngenta about a takeover that would create a giant in the market for seeds and crop chemicals with more than $30 billion in revenue. Getting a deal approved by regulators won’t be easy — and may not happen at all…
To address antitrust issues and help its case, Monsanto has planned for a deal to include a sale of parts of the combined business, a person familiar with the matter has said.
Roundup’s Headwinds
The seed company’s CEO Hugh Grant calls Roundup cancer concerns a ‘distraction rather than a reality.’
The reality is that countries like the Netherlands have banned the product.
When asked directly about the issue, Grant said he didn’t see the issue impacting the business, and that the company will continue to support the product. He called it “unfortunate noise” and a “distraction.”
A look inside Monsanto’s business model reveals some interesting trends and what could be driving a merger and a possible spinoff.
Where it gets interesting is that Monsanto isn’t the only one looking at Syngenta. Private equity groups, Dow and DuPont are also likely suitors.
So why the financial engineering of its business model?
Sales of what Monsanto labels its “agriculture productivity products,” which includes Roundup and similar items, account for about a third of the company’s annual revenue.
Considering industry headwinds such as lower corn production in U.S. and appreciation of U.S. currency, Monsanto has lowered its earnings per share (EPS) guidance for fiscal 2015.
The World Health Organization just declared the ingredient in their signature product, Roundup, a possible carcinogen.
Declining commodity prices aren’t helping.
Corn seed sales are slowing and consolidation would allow for cost cutting measures.
Private equity firms, Dow, Dupont could all line up as potential acquirers of the Roundup line, enabling Monsanto to get the liability off of its balance sheet.
Private equity firms, Dow, Dupont could all line up as potential acquirers of the Roundup line, enabling Monsanto to get the liability off of its balance sheet.
Licensing agreements could enable the company to continue to see a revenue stream from their product given how that it is required for use with their genetically engineered, Roundup Ready crops, while distancing itself from some of the health concerns.
Tax issues and currency risks could also be helped by an offshore merger.
As commodity prices slump, the company is also facing declining borrowing capacity that is based in part on the value of inventory, which has seen a decrease in the midst of corn prices falling.
Amidst all of these challenges and increased scrutiny of its signature product, Roundup, Monsanto could use a merger to divest of its Roundup division.
Glyphosate has been around since 1970 and has been reviewed by multiple regulatory bodies since, including the Environmental Protection Agency. The EPA originally determined that it might cause cancer, but reversed its decision six years later after re-evaluating the study. At the beginning of April, headlines around the world shared that the World Health Organization had declared it a possible carcinogen.
There are a lot of ways to look at the story right now, but it’s especially important to look at how it is impacting farmers.
If you go back to August 2014, forecasters predicted that Argentina was going to plant less corn due to increasing interest rates making loans to farmers more difficult. Other countries are also planting fewer acres of genetically modified crops or rejecting them altogether. In other words, the growth trajectory began to slow.
In October 2014, Monsanto issued cautionary guidance, suggesting that their earnings could be off by as much as 50%. It was a strategic move and is often used on Wall Street, guide numbers down so that you are certain to be able to beat the estimates and provide an upside surprise. It rallies the stock for shareholders.
And that is exactly what Monsanto did.
Monsanto’s earnings were mixed.
But how is this impacting farmers?
At a recent meeting in Missouri that I attended, farmers quietly shared how Monsanto is laying off employees. Earnings weren’t down by the forecasted 50%, but they were down by 34%. Revenue was off, too, and farmers were reporting on the impact.
It’s no secret that government subsidies support this industry. The biotech industry and the chemical companies selling genetically engineered seeds and the portfolio of products needed to grow them enjoy a government sponsored, financial advantage in the form of subsidies.
So how did Monsanto miss?
Currency is playing a role, oil prices, safety concerns, geopolitical maneuvering, as countries like China and Russia, reject Monsanto’s products. Food is a political football.
Corn prices are down.
On top of that, advance contract buys of the agrochemical products used on these crops are also down as farmers are putting off input decisions due to low crop prices. The same thing is happening in fuel and fertilizer. Experts are advising that farm income will be down and for farmers to reconsider cash outlays, capital purchases, etc., based on an expected large dip in net proceeds from the 2015 crop. Farmers are hunkering down. On top of that, the volatility in fertilizer pricing can be one of the more uncertain inputs for farmers, so a hesitation in purchasing is not a surprise.
According to Schnitkey, G. “IFES 2014: 2015 Crop and Income Outlook: Conserve Cash Income.” farmdoc daily, Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, December 30, 2014, “Gross revenues in 2014 are projected to be below total costs. Similarly, 2015 gross revenue is projected to be below 2015 costs.”
That’s not only hammering top line growth but also the value of Monsanto’s inventory.
More Headwinds
And it’s not just U.S. farmers that are hesitating on these purchases. China was once a large importer of these chemicals, and that has stopped. China’s eleven month agchem export is up by 11%, with 17 newly approved pesticides in China.
And all of this happened prior to the recent World Health Organization announcement that the ingredient in Monsanto’s signature product, glyphosate, is a “probable carcinogen.”
In October 2014, Monsanto (NYSE:MON) missed expectations as sales fell 36% in. Revenues of $1.7Bn missed analyst expectations of $1.98Bn by a pretty wide margin (more than 10%).
On top of concerns over the price of corn, extended lower fuel prices could also eat away at the margin between gasoline and ethanol, making ethanol less cost-competitive and ultimately holding the potential to cut demand, thereby further lowering corn prices. There are already calls on capping ethanol, so the world’s largest seed company by sales has been increasing investments intended to bolster growth. An acquisition of Syngenta would further bolster that growth.
In the meantime, Monsanto has been running a share buyback program that is larger than any in the company’s history, and it’s been financed by debt.
Financial Engineering
Debt financings may not be in the best interest of shareholders over the long term. Share buybacks prop up the share price in the short term, but when they are financed with debt, the process also levers up the company.
So what could Monsanto do? Where could they find the cash to financially reengineer some of these issues?
Under a merger, Monsanto could restructure its balance sheet and portfolio, addressing the increased concerns around Roundup by selling off the division and using the proceeds for an acquisition.
The seed company’s CEO Hugh Grant calls Roundup cancer concerns a ‘distraction rather than a reality.’ Is it a big enough distraction to divest?
When asked directly about the issue, Grant said he didn’t see the issue impacting the business, and that the company will continue to support the product. He called it “unfortunate noise.”
But a Monsanto-Syngenta merger would allow a graceful exit strategy for the Roundup division.
It’s not an unprecedented move. Monsanto has a similar experience with another of its products, Posilac, recombinant bovine growth hormone, when it came under increased scrutiny and public concern. When the science got controversial and consumers caught wind of it, the market responded with manufacturers labeling their products as “rbGH-free” and Monsanto sold the dvision to Eli Lilly. Consumers, once educated, wanted nothing to do with it, much like what the marketplace is seeing around glyphosate and the response to the World Health Organization’s calling it a “probable carcinogen.”
Like it was able to do by selling its Posilac/rbGH division to Eli Lilly. Monsanto could raise the funds for an acquisition and corporate restructuring by selling off its Roundup division to a private equity group or other interested buyer. It could continue to capture the financial upside of its Roundup Ready product line with licensing agreements that relate to their genetically engineered, Roundup Ready products, without carrying the PR responsibility and liability on its balance sheet.
Monsanto isn’t in business to save the world. It’s an agrochemical company. If one division appears to be increasingly weak, the fiduciary duty of the company’s executives is to address it. And in many cases, that can look like a merger, acquisition or sale.
Let someone else turn it around.
A quick look at their prior earnings model shows that the division is experiencing a contraction. It was already happening ahead of the World Health Organization announcement.
Few investments firms are saying anything. Transactions of this size, either debt deals or M&A activity, can enrich financial analysts who back the company and the banks they work for, despite red flags.
It’s not the first time for something like this to happen. Analysts ignored the erosion of Enron’s core business, as the company made millions in transaction fees for the banks.
A merger between Monsanto and Syngenta would create a lucrative deal for the banks overseeing it. Banks benefiting from debt and equity deals less inclined to report negatively for fear of losing those deals.
The world feels fragile, particularly in a geopolitical and economic sense, says my friend Vikram Mansharamani over at Yale.
As global concern around Monsanto’s products grow, along with currency concerns, declining commodity prices, inventory issues, health concerns and more, it appears that Monsanto’s business model just might be increasingly fragile, too, and that an M&A activity is intended to shore it up.
Just as Enron’s tagline encouraged us to “Ask Why,” perhaps it’s time that we do the same with Monsanto.
Growing fruit comes naturally to Ralph Broetje—Broetje Orchards in eastern Washington State, developed with his wife Cheryl, is the largest contiguous orchard in the US. When he tried out a new apple variety bred in the Czech Republic, a cross between the Golden Delicious and the Topaz, the bright yellow fruit turned out to be firm, crispy and crunchy, with a sweet/tangy flavor and floral aroma. And, by “happy coincidence,” the Opal Apple was non-browning: its low occurrence of the browning enzyme delays the process.
Today, Ralph grows one million Opal trees, spanning nearly 1,000 acres of the total 8,000 acres (10 million trees) the company oversees. The Opal debuted in the US in 2010. To distinguish Opals from the recently approved genetically modified, non-browning Artic Apple, Broetje put the seal on it—last year, the Opal became the first apple to achieve Non-GMO Project verification.
Centralization for Quality Control
Broetje Orchards is unique in that produce is grown, stored, and packed in the same location, with a 1.1 million square-foot modern warehouse and packing facility on-site, with 105 atmosphere-controlled rooms. The company packs 25,000 boxes a day—8 million boxes a year—of 15 different varieties, including Opal, Fuji, Gala, Pink Lady, Braeburn and Golden Delicious. Broetje employs 1,100 year-round, with 1,000 seasonal workers.
Opals are only available December through April; almost 12 million pounds are distributed each season. Around 15% of the Opals are organic.
Keith Mathews, CEO of sales and marketing at FirstFruits, said extensive funds have gone into social media outreach and public events to market the Opal, including tastings at 5K races, winter carnivals and conferences, and in-store demos. Currently the Opal is priced midway between mainline apples and the Honeycrisp.
Threats from GM apples
Mathews said contamination from the new GM Arctic Apple is a definite possibility. “Washington farmers have put their entire lives into apples since the early 1900s. Our Northwest Horticultural Council lobbied hard in DC to oppose GM apples, but we lost. The risk lies in bees pollinating our non-GMO acres.”
Ralph notes that none of the farmers he knows are eager to grow a GM apple, and that its presence might create doubts among consumers about eating apples at all. “There’s no need for a GM apple,” he said.
Mathews noted that the sliced apple business is the only point of value for a non-browning apple, and it’s an important but very small niche of the apple market at about 7-8 million bushels each year.
The company enrolled in Non-GMO Project verification to reinforce consumer awareness that a non-browning apple doesn’t have to be a GM apple. “The folks at the Project were very helpful,” Mathews said. “One complication occurred because I put through my organic and conventional Opals at the same time, and we normally wax our conventionals. There is a miniscule ingredient in the wax we had to deal with, so that took a bit of fine-tuning and frequent checking.”
Mathews expects demand for Opals to build. “We will easily get to one million boxes each season with what’s in the ground already.”
It’s a store owner’s million-dollar question: How can I attract and maintain a loyal cadre of customers? What can I offer them that will directly add to their quality of life?
Laurie Powers-Shamone has been pondering that for 43 years. That’s how long she’s been working in the natural foods industry, starting in a Florida food coop and now serving for 26 years as Store Director of Nature’s Food Patch in Clearwater—the only large natural grocer in upper Pinellas County.
She’s also earned a reputation in the industry for strong action against GMOs. In 1999 she lobbied Congress as a member of the National Board of Directors of the Natural Products Association. In the early 2000s, Nature’s Food Patch sponsored talks by Craig Winters, founder of the Campaign to Label Genetically Engineered Foods, and GMO expert Jeffrey Smith. “The Patch” provides ongoing GMO and holistic health education for customers through brochures, lectures, movies and social media blasts.
The hunt for GMOs
“Consumer GMO awareness picked up significantly in 2005 when the Non-GMO Project started,” Laurie said. “Still, all we could tell customers was to buy organic or Non-GMO Project Verified items, because we just didn’t know where GMOs were hiding.”
It came to a head in 2012. As GM labeling bills failed to pass, Laurie decided The Patch was going to take on the challenge independently: she hired a full-time GMO researcher to go through every product in the store to determine GMO presence.
“We’d call every manufacturer and ask for detailed information if there were suspicious ingredients,” Laurie said. “We got rid of lots of items. If the item was super popular and couldn’t be replaced, we’d label it as GMO. We don’t allow any new products into the store that contain GMOs.”
The goal is for each item to be either “Patch Verified,” indicating written certification from the manufacturer or producer that the product is GMO free, or Non-GMO Project Verified. Otherwise a “possible GMOs” label is attached. The Patch lets the manufacturer know that if they can’t provide information, they risk losing their spot on the shelves. Many suppliers have taken the challenge seriously and have turned to Non-GMO verification as a result.
Marketing Director Cheryl Rosselle says the biggest challenge is finding the GMOs in the first place. “Many of the ingredients can be hiding. The next challenge is getting the manufacturers to answer you, or even to find a contact. Often the person who answered the phone would know little about GMOs.” Second generation GMOs, such as GM feed, are also challenging.
Building community through trust
The result? The Patch has become known as “one of the most ethical stores around.” It was chosen recently as one of the Top 12 Right to Know Grocers (Diligent Dozen) by the Organic Consumers Association. And it has seen two major expansions: from a 5,000 square foot (sf) farmer’s coop, it grew to 14,000 sf and then in 2010, was expanded to its current 22,000 sf. (A 2,000 sf addition is planned for a learning center/community room.)
Powers-Shamone now knows one secret that other retailers can learn from: labeling GMOs is a smart marketing tool. “Putting up that first label was hard, and it took quite a lot of time for me to make that decision,” she said. “Traditionally in advertising, you don’t talk about bad things, but people simply want to know if GMOs are present.”
The work invested in earning consumer trust has generated a loving, customer-engaged atmosphere at Nature’s Food Patch, Laurie says. “When they know we care about their health and well being, it builds community. Our continuing efforts to educate and provide the best food inspire our staff as well as everyone who comes through the door, or visits us online.”
Laurie’s latest brainstorm is that the responsibility for transparency needs to shift. Of the five levels involved in food production—grower of raw materials, manufacturer, vendor, retailer, and customer—she felt in 2012 that as a retailer she had to do the work due to pressure coming from level five, the customer. “It’s the second level—the manufacturer of products—that should be disclosing GMOs,” she says. “My latest idea is, why can’t the vendor do the work and label all GMO products in their catalog?”
But for now, the investment has paid dividends. “When we got the ‘Top 12 Right To Know Grocer’ award, we heard from folks all over the country, who said, ‘Please come build a store here!’” she recalls. “It was a tremendous reward for all the hard work.”
A growing number of Americans are learning about Monsanto, the chemical company that has genetically engineered our food to withstand increasing doses of their chemicals, particularly the weedkiller, Roundup.
Since the introduction of these genetically engineered seeds, the use of this weedkiller has more than doubled. At least 283.5 million pounds of glyphosate were used in the US in 2012, more than double what was used in 2002, according to Reuters.
It’s a brilliant business model for a chemical company. Engineer seeds so they can tolerate increased applications of your signature weedkiller. Patent the seed, license its use to farmers, and suddenly, you’ve got a powerful revenue stream.
That is, of course, until consumers find out about it.
Over 60% of the world’s population already knows. These foods are labeled in 64 countries, for all of our key trading partners. But not for Americans.
So what else do we not know about Monsanto? The company has been around for over 100 years, manufacturing things like Agent Orange and DDT. A few more things we should probably know about the chemical company now making our food:
They used to make laundry detergent. Remember All? In 1946, Monsanto developed the laundry detergent and began to market it.
Glyphosate, the key ingredient in their signature product Roundup, was initially used as a descaling agent to clean out calcium and other mineral deposits in pipes and boilers of residential and commercial hot water systems by the Stauffer Chemical Company. It has been banned in the Netherlands.
In 2010, Monsanto registered glyphosate as an antibiotic. This newly register antibiotic is used in Roundup and applied to their Roundup Ready, genetically engineered crops that we eat and the meat we eat….eats. We’re eating this antibiotic every day. Don’t we usually get prescriptions when we take an antibiotic?
Monsanto’s CEO is from Scotland. According to their laws, “The Traceability and Labelling Regulations (EC) 1829/2003 and (EC) 1830/2003 require that any intentional use of GM ingredients in food and feed at any level must be labelled.” So when he goes home to Scotland, GMOs are labeled. He doesn’t think Americans need this information. I’ll let you think about that for just a minute….
On February 11, 1985 the carcinogenic potential of glyphosate was first considered by an EPA panel, called the Toxicology Branch Ad Hoc Committee. Three years later, the first patent was issued on genetically engineered foods. Six years later, just prior to the introduction of the first Roundup Ready crop, this decision by the EPA was quietly reversed. Remember the tagline from Enron? Ask why.
Monsanto has farmers sign a “Technology Stewardship Agreement.” It commits them to using the portfolio of chemicals required to grow genetically engineered, Roundup Ready crop. Read the fine print in which farmers hand their rights over here.
Monsanto’s CEO called the recent report out of the World Health Organization “junk science.” The World Health Organization is the United Nation’s public health arm and consists of the world’s leading scientists. In the U.S., 1 in 2 men are expected to get cancer in their lifetimes. To call the report “junk science” impugns the integrity of scientists around the globe and dismisses with alarming casualty the rates of cancer we are seeing here in the U.S. He is from Scotland where perhaps the rates of cancer aren’t as severe, but here in the U.S., physicians from Memorial Sloan-Kettering Cancer Center and 120 experts in chronic myeloid leukemia (CML) from around the world banded together to draw attention to the rising cost of cancer.
So what can an American do, besides move to Scotland where GMOs are labeled?
Call on Congress to enact the mandatory labeling of genetically engineered foods at www.justlabelit.org
Call on the FDA to conduct mandatory, pre-market safety testing of these products before they are put onto our grocery store shelves.
Protect our farmers. According to the World Health Organization, glyphosate has been detected in the blood and urine of agricultural workers, indicating absorption. Call on the EPA to address this issue for our farm families. Contact the Director of the Pesticide Review Board at the EPA at 703-308-8181.
Opt out of these genetically engineered foods when you can by looking for foods that are USDA Organic certified or carry the Non GMO Project verification seal.
Leverage 21st century technology to design a smarter food system and smarter pesticides that are safe and affordable for all families.
