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New York Times Says AgBiotech Has Been Harmed But Will Regain Momentum

December 20, 1999

Rocky Outlook for Genetically Engineered Crops

By BARNABY J. FEDER
New York Times

Agribusiness leaders are as confident as ever that the need
to feed a
growing world population makes it both essential and
inevitable that biotechnology will play a central role in
21st-century farming. But for
now it looks like the industry may be pulled over by
consumers and fined
by investors for recklessly speeding toward such a future.

Sales of genetically engineered crops soared in 1999, but a
sharp slowdown in growth, if not an actual decline, seems
likely in 2000, and
even industry optimists are saying it may take several years
to get rolling again. Crop surpluses, which undermine
farmers' willingness to pay for new technology, trade
tensions, and antitrust concerns have all
contributed to the uncertain outlook. But the biggest jolt
to the visions of the multinational giants that dominate
agribusiness have come from a surge in consumer fears about
the safety of the novel crops.

It has made no difference that regulators and major food
companies agreed with the industry that there was scant
evidence of any significant human health hazard. Nor has it
mattered that most researchers contend that critics have
wildly exaggerated evidence that
biotechnology is likely to create superweeds or widespread
destruction of beneficial insects like Monarch butterflies.

Over the last year, governments and the industry's biggest
customers began deciding it was better to retreat than to
ignore negative public sentiment. The backlash was strongest
in Europe, where supermarket
chains took foods containing oil from genetically modified
corn and soybeans off their shelves, and regulators tabled
applications to plant new genetically altered strains of
beets and canola despite the opinions of their own science
advisers that the crops were safe.

Some of the biggest drug, food and chemical giants have
already retreated from the once popular model of becoming
"life sciences" companies with strong footings in every
sector affected by biotechnology. Early this month,
AstraZeneca P.L.C. of Britain and Novartis A.G. of
Switzerland, announced plans to spin off and then merge
their agricultural businesses into a new company to be
called Syngenta. "We went three steps forward in recent
years, but we are now taking two steps back," said Sano M.
Shimoda, founder of BioScience Securities, a research firm
based in Orinda, Calif., that concentrates on agricultural
biotechnology. "I don't think we've seen the worst of it
yet."

The biggest business beneficiaries of the biotechnology
backlash may be
the manufacturers of the traditional agrichemicals that have
been losing
market share and money while battling to slow the move of
farmers to
new crops that are devised to work best with just one
herbicide or, in
some cases, to eliminate the need for certain insecticides.
Some chemical giants like DuPont, Dow Chemical and Aventis
have major
commitments to biotechnology as well, but others, like the
struggling
American Cyanamid pesticides business of American Home
Products,
have little to lose from a setback for biotechnology.

One development many foresee for next year is the adoption
in many
countries -- perhaps even the United States -- of labeling
standards for
food containing genetically modified products. Opponents of
biotechnology predict confidently that labels will lead to
widespread
rejection of modified products, pointing to recent
experience in Europe,
where retailers have raced to advertise "G.M.O.-free"
products, referring to genetically modified organisms.

But analysts say that outcome depends largely on whether
both kinds of
products remain on the shelves, and the level of fears about
health
hazards and pricing. In the United States, they point out,
milk produced
from cows that have not been injected with Posilac, a bovine
growth
hormone that Monsanto produces in bacteria, is labeled, but
it is usually premium-priced and only a very small
percentage of consumers seek it out. Monsanto said that
Posilac sales expanded 20 percent this year and that its new
production plant under construction in Georgia was expected
to begin producing the hormone by the end of next year.

Barring stronger evidence that biotechnology poses major new
hazards,
analysts and the industry's major players believe that any
slowdown or
decline this coming year is likely to be reversed. The
underlying forces
that had made agricultural biotechnology such a hit on Wall
Street as
recently as last year continue to gather strength. The
world's population passed six billion and, although the
growth rate is slowing, the demand for rice, wheat and corn,
the three mostly widely planted grains, is projected by the
International Food Policy Research Institute in Washington
to increase 40 percent by 2020.

With the acreage of arable land basically unchanged over the
last 30
years, there is increasing pressure to use biotechnology to
make
agriculture more productive. And researchers continue to
expand markedly the industry's tools and potential.

Thomas C. Humphrey, president of DuPont's nutrition and
health businesses, notes that public and private money is
pouring into research
on human, animal and plant genetics and into study of their
interaction
with the environment. "When all that starts to intersect in
two or three
years, it's going to be incredible," he said.

The most recent breakthrough was a project to alter rice so
that it would produce the protein necessary to create
vitamin A in its grain. That development is estimated to be
five years from commercialization, but it was widely hailed
in developing nations as a way to help prevent the deaths of
up to three million children annually and eliminate millions
of cases of blindness.

"The main risk is that we keep talking and don't move
ahead," said Per
Pinstrup-Andersen, director general of the International
Food Policy
Research Institute.

"If we create biotech options, farmers will take them if
they like it," Mr.Pinstrup-Andersen added.

That sounds logical enough, but one hot question is whether
farmers
actually have much choice. Industry critics contend that the
new
technology has become so concentrated in the hands of
powerful
multinationals that they have the marketing influence with
international aid agencies to force some products on
farmers.

Critics also say that blown pollen can transfer traits from
genetically
modified crops to the fields of organic farmers and others
that want
nothing to do with the technology. They are pressing for
much stronger
regulation and a very broad interpretation of what kinds of
effects might be classified as damages for which corporate
sponsors of biotechnology could be sued.

The groundswell of public fears and opposition came too late
to have
much impact on what was planted this year, but farmers are
watching the
futures markets for signals about what seed to buy this
winter. With a
growing number staring at bankruptcy after two years of
bumper crops
and low prices, farmers are worried about paying higher
prices for
genetically modified seed and then finding the next harvest
difficult to sell because of opposition to such crops.

Monsanto has the most to lose from such fears, especially in
soybeans.
Nearly half of the United States soybean crop this year was
modified to
tolerate spraying with Roundup, the company's best-selling
weed killer.
Analysts predict market declines in the United States for
both the
modified beans and the company's modified corn (farmers say
the latter's
ability to generate a pesticide was not worth the cost in
many areas this year because of low insect populations).
Monsanto says it remains
somewhat optimistic that the market for both will continue
to grow both
at home and abroad, according to Hugh Grant, co-president of
the
company's agricultural business.

One key to the year will be Brazil, where approval of
Roundup-Ready
soybeans has been recommended by the Government but tied up
in
court. Biotechnology critics say that thanks to the ban,
Brazil will have higher exports to Europe, but the real
world may not provide a clear test. Reports suggest that
anywhere from 5 percent to 15 percent of the Brazilian crop
planted this fall has been grown from Roundup-Ready seed
smuggled in from Argentina, where the crop is legal and very
popular with farmers.

Such percentages could make it too expensive for Brazil to
certify its
crops as free from modification, since crops from many farms
get mixed
together during shipment.

For biotechnology backers, such complications are just one
more reason
to believe that the past year's turmoil will not derail the
industry for long. Safety fears may slow growth, they say,
but each year will bring new products that make farming
easier or consumer products more appealing.

"The genie is out of the bottle with regard to the
technology," said
Michael Phillips, executive director for food and
agriculture of the
Biotechnology Industry Organization, a Washington trade
group.

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