Sign on The Dotted Line

Grower agreements are becoming a part of doing business

if you want to use biotech seed.

By Gregg Hillyer


Farmers who planted Roundup Ready corn this season agreed to find a domestic market for the grain if it was not approved for export by harvest. PHOTO: GREGG HILLYER


Liberty Link Soybeans On Hold

Earlier this spring, AgrEvo announced it was delaying the commercial introduction of Liberty Link soybeans. The genetically modified crop is resistant to the nonselective herbicide Liberty. Instead, the company will focus on expanding seed production for 1999, when it expects to launch commercial sales.

The company postponed plans for a limited release this spring because major soybean markets such as the European Union and Japan have yet to approve the genetically modified seed for import and processing. Roundup Ready soybeans have been approved by these trading partners.

The American Soybean Association, trade groups and USDA had expressed concerns on how to keep Liberty Link soybeans out of export channels should approval be delayed past harvest. Nearly half of all U.S. soybeans are exported, representing a $9 billion market.

Rick Mohan, Liberty Link soybean market manager, says the company had containment plans in place to ensure domestic use. "We had identified some key processors who had agreed to take the Liberty Link beans and manage them to keep them segregated.

"But because of ASA's concerns and the fact seed supplies were very limited, we felt it was the most prudent and best decision to forego our commercial launch this season."

Mohan says regulatory submissions are ongoing for product approval in the major soybean importers. "It was unlikely we would have had approval by fall. But we expect it in 1999," he says.

What happens if the regulatory issue is unresolved by next season? "Since we're not facing that situation, I'm not sure what our specific plans would be," says Mohan. "But we would act accordingly and move forward in a responsible way."

Read the fine print. That's good advice before signing any document. Just ask users of Monsanto's Roundup Ready seed.

Thousands have penned their signatures on grower agreements to purchase and plant the genetically modified crops. In return, they're obligated to follow specific terms and production practices.

Industry watchers say similar contracts will become more common as companies move to protect patent rights and licensing arrangements and to recoup the millions spent to develop the technology.

"The marketplace will determine if these grower agreements are good, bad or indifferent," notes Bill Freiberg, publisher of the industry magazine Seed & Crops Digest. "If the technology is good and farmers feel they are making money, then they'll continue to sign it. But if they aren't making a profit from the technology, they're less likely to support them.

"In all likelihood, they would probably abandon the technology altogether and go back to a more conventional seed/herbicide system or switch to another technology," adds Freiberg.

As one of the first firms to commercialize high-tech seed, most attention has focused on Monsanto's grower agreements.


For Domestic Use Only

Roundup Ready corn joined the company's biotech portfolio this spring. In its first season, the genetically engineered seed is being sold exclusively through DeKalb. Estimates peg acreage at 750,000.

Purchasers of Roundup Ready corn were required to sign a technology agreement. Terms included an $18 per bag technology fee and a pledge to use only a Roundup-branded herbicide over-the-top, if a herbicide with the same mode of action as Roundup is used.

The technology fee was rebated if growers used Roundup Ultra over-the-top and Monsanto brand residual herbicides such as Harness.

The document also pointed out that growers "should be prepared" to find domestic markets for the corn if regulatory approval for export from the European Union is still pending by harvest.

"The European approval process has been anything but clear," notes Vernon Benes, Roundup Ready corn manager for DeKalb. "To be up front with growers, we are trying to communicate possible harvested grain restrictions. If Roundup Ready corn does not receive European approval, you will need to find a domestic market for the grain."

Dan Holman, a spokesman for Monsanto, says, "We believe farmers knew what they signed and agreed to do when they purchased Roundup Ready corn. Since we're not anticipating EU approval by harvest, they need to take steps now to find a domestic market for the corn."

In March, DeKalb sent a letter to growers who had booked Roundup Ready corn explaining the regulatory issue and their options. Both companies also provided information in sales literature and at grower meetings.

Benes believes channeling the harvested grain shouldn't be a problem. Unlike soybeans, the majority of U.S. corn is used domestically with a small percent exported to Europe.

Linda Thrane, corporate communications director for Cargill, notes, "The onus is really on the companies marketing this seed to make sure farmers are fully informed on what to do with the corn to ensure it doesn't get into the export stream."

Benes says DeKalb is ready to help farmers find feed mills that process corn for domestic consumption. He notes there are more than 2,000 processors in the central Corn Belt alone.

Growers will be provided a toll-free number to DeKalb's customer service center if they need help identifying operators accepting grain for domestic feed use, he adds.

Soybean farmers got their first look at Monsanto's technology agreement in 1996, the inaugural year of Roundup Ready soybeans.

Terms prohibit growers from saving or saving and selling seed containing the Roundup Ready gene to plant the following season. Nationally, it's estimated 20 to 30% of farmers save soybean seed to plant the following year. Each bag of seed is also assessed a $5 technology fee.

"We feel very strongly that farmers should adhere to the no saved seed restriction," says Doug Dorsey, Roundup Ready soybean manager. "We think it's important that the technology is protected and that there's a level playing field for all growers. Farmers have told us they're comfortable with this provision as long as it's the same for everyone."

Farmers' Concerns

Growers, however, weren't comfortable with the agreement's original provision that allowed on-farm and field inspections for up to three years.

"I was real concerned about the agreement that first year," notes Bob Christensen of Malvern, Iowa. "I almost didn't plant Roundup Ready soybeans because it seemed Monsanto was threatening you to guarantee you wouldn't save the seed for replanting."

Concerns like Christensen's got the company's attention.

"Enough farmers were upset that we felt it was best to eliminate it the following season," notes Dorsey. The language of the agreement was also simplified to make it more farmer-friendly. The technology fee remains, however.

Monsanto has also modified its message. The tone is softer, emphasizing fairness to farmers rather than harsh consequences. This spring the company began placing ads in farm magazines and airing radio spots warning farmers of seed piracy. Other ads emphasize why every grower has a stake in protecting new crop technology.

"Since the technology agreements were changed, it's not that big of issue," says Christensen, who planted all of his soybean acreage this year to the genetically modified crop. "Farmers have to realize it's part of doing business if you want the technology."

The popularity of the seed has also eased criticism. More than 25 million acres were planted to Roundup Ready soybeans this year in the U.S. That's more than 1 in 3 acres.

Still, Monsanto has made it clear it's taking an aggressive approach to ensure farmers play by the rules.

Acting on tips from farmers, retailers, seed salesman, seed cleaners and others, the company hires Pinkerton agents to investigate reports to determine if seed has been illegally saved.

Since the release of Roundup Ready soybeans, Monsanto has received 100 to 200 reports of saved seed. Last year, about 50,000 farmers planted Roundup Ready seed, notes Dorsey.

"We categorize it as a pretty small occurrence," he adds. "Farmers are honest. If they know the rules, they will abide by them."

For those who don't abide, Monsanto prefers to reach an out-of-court agreement. However, several cases have made their way to the courts.

Settlements are tough. They may include farmers having to destroy the crop, cash payments to the company and several years of on-farm inspections.

Another potential penalty is forfeiting the right to plant Roundup Ready soybeans. "That's considered a last resort," Dorsey says. "Our goal is to make sure they don't plant saved seed again, not necessarily to prevent them access to the technology."


Roundup After 2000

As technology and market conditions change, so will the grower agreement. On the immediate horizon for Monsanto is what to do when Roundup Ultra goes off patent in the U.S. in 2000, potentially opening the flood gates to generic duplicates.

The technology agreement specifies the use of Roundup Ultra on Roundup Ready soybeans. Dorsey acknowledges the company has made no decision on the post-patent issue.

"What we're asking from the grower today is to agree to use Monsanto's Roundup Ultra," he says. "Roundup Ready soybean technology has been developed with Roundup branded formulations to provide the greatest margin of crop safety.

"We'll continue to promote the use of our herbicide brands," Dorsey adds. "What the agreement will say in 2000 is a bridge we'll cross later."

How the agreement is worded may also depend on a pending registration application from Zeneca. The chemical giant has submitted documents to EPA to label the company's nonselective herbicide Touchdown for use on Roundup Ready soybeans.

According to Chuck Foresman, technical business leader for Zeneca, both Touchdown and Roundup do have the same mode of action. Both are derived from the same acid but use different salts in their formulations.

"We fully expect to get registration," Foresman says. "EPA has had no questions on the components of our request. We'll have to wait and see what happens."