Ag Biotech:Portrait of An Industry in Trouble

HOLD FOR RELEASE
THURSDAY, FEBRUARY 17, 2000
12:00 PM EST

Worldwatch News Brief 00-01

PORTRAIT OF AN INDUSTRY IN TROUBLE
by Brian Halweil

After four years of stupendous growth, farmers are expected to reduce their
planting of genetically engineered seeds by as much as 25 percent in 2000, as
spreading public resistance staggers the once high-flying biotech industry.
Stock prices for agricultural biotech companies are falling,
exports of transgenic crops are tumbling, and questions are mounting about the
liability
for what is turning into a major debacle for farmers. At the same time,
some 130
nations just signed an international biosafety agreement prescribing caution.

Worldwide, the area planted to transgenic crops jumped more than
twenty-fold in
the last four seasons, from 2 million hectares in 1996 to nearly 40 million
hectares in 1999. In the United States, Argentina, and Canada, over half the
acreage for major commodities like soybeans, corn, and canola are planted in
transgenics. (These three nations account for 99 percent of the global
transgenic acreage, pointing to the limited global acceptance.)

But with a growing number of food manufacturers and grocery chains in Europe
taking products containing transgenics off the shelves, the market for these
crops has been shrinking. American exports of soybeans to the European Union
plummeted from 11 million tons in 1998 to 6 million tons last year, while
American corn shipped to Europe dropped from 2 million tons in 1998 to 137,000
tons last year: a combined loss of nearly one billion dollars in sales for
American agriculture.

Investors have reacted harshly to the growing consumer rejection of
transgenics
and the resulting reduced sales of engineered seed and complementary
agrochemicals. In May of 1999, Europe's largest bank, Deutsche Bank,
recommended
that investors sell all holdings in companies involved in genetic engineering,
declaring that "GMO's [Genetically Modified Organisms] Are Dead." The bank's
report envisioned the development of a two-tiered
commodity market in which non-transgenic crops would command price premiums
over
transgenic crops-a prospect that threatens the farmers planting engineered
seeds
and the companies that sell these seeds.

In fact, top commodity handlers, such as Archer Daniels Midland and A.E.
Staley,
have already begun to discount transgenic crops because of this greater
financial risk. Commodity traders have followed suit fearing the loss of
export
markets as Japan, South Korea, Australia, Mexico, the members of the European
Union, and other nations draft laws requiring mandatory labeling of food
products containing transgenic ingredients.

Most major food companies have already announced that they will avoid
transgenic
ingredients in their products for the European market. But now recent surveys
indicate that consumer tastes are souring on the other side of the Atlantic as
well. Several food manufacturers, including Gerber, Frito-Lay, and natural
food
retailers Wild Oats and Whole Foods, have said that they will avoid transgenic
ingredients in their products sold in the United States-the largest consumer
market for transgenic crops. If more American manufacturers hop on the
bandwagon, the drop in demand would be devastating for transgenic growers and
seed producers.

Share prices for biotech seed companies that were Wall Street's darlings a few
years ago are sinking towards all-time lows. Investors in Monsanto Company,
the
industry leader which has born the brunt of public criticism, have watched the
corporation's share price lose nearly
one-third of its value in the last year, falling from a high of $50 in
February
of 1999 to a recent low of just $35. (See Figure 2.)

Brokerage houses have been advising major players in the biotech industry to
spin off their ailing agricultural divisions. Novartis and AstraZeneca both
followed this advice in December of
1999. Dupont had been considering issuing a new stock that would track its
much-celebrated and nascent ag biotech division, but decided in early 2000 to
indefinitely postpone the stock's release. And struggling to recoup nearly $8
billion in seed company and agricultural biotechnology investments, Monsanto
merged with pharmaceutical and chemical giant Pharmacia Upjohn at the end of
1999. The new firm quickly decided to turn Monsanto's agricultural unit into a
separate company.

Further complicating the financial picture are concerns about uninsured
liabilities for farmers and agribusiness companies. In November 1999, 30 farm
groups, including the National Family Farm Coalition and the American Corn
Growers Association, warned American farmers that "inadequate testing of
gene-altered seeds could make farmers vulnerable to 'massive liability'
from damage caused by genetic drift-the spreading of biologically modified
pollens-and other environmental effects." In December, a group of high-profile
lawyers filed a class-action lawsuit against Monsanto, on behalf of
American soy
farmers, charging that the company has not conducted adequate safety
testing of
engineered crops prior to release and that the company has tried to monopolize
the American seed industry.

To many observers, the rapid release of transgenic crops and the ensuing
financial disarray is disturbingly reminiscent of the earlier uncritical
bandwagons for nuclear energy and chemical pollutants like DDT. A
combination of
public opposition and financial liability eventually forced retrenchment of
these earlier technologies, after their effects on the environment and human
health proved to be far more complex, diffuse, and lingering than the promises
that accompanied their rapid commercialization.

In an effort to avoid this same dismal cycle with the introduction of each new
"revolutionary" technology, public policy advocates have called for the
adoption
of the precautionary principle. Under current policy, a technology is all too
often judged safe until it is definitively proven harmful. The precautionary
principle holds that when a new technology carries suspected harm, scientific
uncertainty of the scope and scale of the harm should not necessarily prevent
precautionary action. Instead of requiring critics to prove that the
technology
poses potential dangers, the producers of a technology shoulder the burden of
presenting evidence that the technology is safe.

Industry has long labeled the precautionary approach as reactionary, arguing
that it stifles research and prevents economic progress. On the contrary,
advocates realize that all stakeholders-including consumers, government, and
industry-benefit from an open and democratic attempt to anticipate any
undesirable social and financial surprises. The goal is to apply wisdom and
judgement about the potential effects of a new technology before flooding the
marketplace with the products of that technology.

The rapid rollout of genetically engineered crops over the last four years
stands the precautionary principle on its head. Widespread
commercialization of
transgenic crops has come before-not after-any thorough examination of the
benefits and risks associated with these crops. The regulatory framework
devoted
to transgenics is inadequate, nontransparent, or completely absent. And there
has been essentially no public discussion about the many potential
consequences
of large-scale planting of transgenic crops. For example, U.S. Secretary of
Agriculture Dan Glickman only recently called for studies assessing the
long-term ecological effects of these crops. But more than half of the U.S.
soybean crop and nearly as much of the corn crop are already genetically
engineered.

Another recent illustration of our lack of precaution was presented in a
December 1999 article in Nature reporting that the insecticide produced by a
widely planted variety of transgenic corn can accumulate-in its active form-in
the soil for extended periods of time. The authors note that the effects on
soil
organisms and soil fertility are largely unknown, but potentially enormous.
But,
like earlier laboratory studies showing that pollen from this same corn
could be
lethal to certain beneficial insects, the fact that such effects had not been
considered prior to planting tens of millions of hectares in this crop raises
concerns about the adequacy of existing safeguards for ecological and human
health risks.

-END-

Brian Halweil is a Staff Researcher with the Worldwatch Institute, a
Washington, DC-based research organization.

CONTACT INFORMATION FOR JOURNALISTS:

Brian Halweil, 202-452-1992 x 538, <halweil@worldwatch.org>
Mary Caron, Press Director, 202-452-1992 x 527, <mcaron@worldwatch.org>

Also, visit the Worldwatch website at <www.worldwatch.org>.