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The Gene Food Segregation Fantasy

Reaping a biotech blunder
Fortune February 19, 2001

Just about everybody ignored the safety rules on a kind of biotech
corn called Starlink. Luckily, no one died from eating it. But what if
someone had? by Brian 0'Reilly

For anyone in the business of growing corn, one of the biggest frustrations
of the job is a brown inchworm-like creature that spends most of the
summer and fall munching and tunneling through the corn, only to emerge
as a moth that flies off to spawn a lot more inchworms. Like many
adolescents, corn borers can be enormously destructive. Depending on
when in the growing season they arrive, they can damage arteries that
carry moisture to corn, or even cause the entire ear to fall off before harvest.
The borer costs American farmers and their $20 billion corn crop upwards
of $1 billion a year, if you count diminished yields plus the price of pesticides
and other measures needed to keep the borer at bay.

So in 1995, when scientists produced an early variety of genetically
modified corn that poisoned the borer shortly after its first
cornstalk casserole, farmers fairly jumped for joy. But last summer,
right in the middle of the harvest, things got messy. Plant Genetics
Systems, a company now owned by Aventis, a giant European
pharmaceuticals firm, had developed another borer-killing gene that it
called Starlink. However, the toxin that Starlink produced in the corn
plant resembled a substance that triggers violent allergies in some
people. When federal regulators threatened to ban Starlink corn until
its safety in humans could be established, the developers thought they
had a better idea. In effect, they promised to sell Starlink seed only
to farmers using it for feed corn; in turn, the farmers would agree
not to sell the seed to anyone who would put it in human food. Okay,
said the feds. But be careful.

Well, guess what? Almost everybody involved screwed up. Even though
Starlink was on the market for just three years-and made up just 0.5%
of the 80 million acres of corn planted in the U.S. last year-it began
showing up in all sorts of places it didn't belong, including tacos,
corn chips, breweries, and muffin mix. The promises made by Starlink's
inventors proved worthless, falling prey to managerial inattention,
corporate mergers, blind faith, misplaced hope, woeful ignorance,
political activism, and probably greedy farmers too, if you can
imagine such a thing.

Any batch of core destined for human consumption must now be ground up
and tested for the StarLink gene.

The episode hardly qualifies as a disaster, since no one seems to have
gotten seriously ill from eating Starlink corn. Howard Buffett, son of
Warren and a farmer near Decatur, Ill., even sees a bright side to it;
he says Starlink has revealed the shortcomings of federal oversight
and has pointed up the inability of the grain-handling industry to
segregate subtly different products. Still, Starlink has caused no end
of hassles for farmers, grain-elevator operators, railroads, and food
processors. Neil Harl, an agricultural economist at Iowa State
University, calls it "the biggest assault on American agriculture I
have ever witnessed." Altogether, the fiasco could cost Aventis half a
billion dollars.

The long-term consequences may be more severe. So far Americans have
been much more accepting of genetically modified food than the rest of
the world. If Starlink triggers hysteria among Americans, the world's
biggest appetite for that promising technology will shrink, and the
whole science will be retarded for years. If foreign food processors
that buy U.S. agricultural commodities worry that American grain glows
in the dark, they will turn even more to Brazil and other countries
for their food, and U.S. farm prices, already depressed, will fall
further.

Harvest of Trouble
Starlink seeds were planted on just 350, 000 of America's 80 million
acres of com last year, mostly in the upper Midwest.

1-1,000 acres
1,001 - 10,000 acres
10,000 - 100,000 acres
Iowa: 135,000 acres

One of the more surprising revelations of the Starlink mess isn't that
genetically modified food h0as suddenly appeared in the food supply,
but rather how much such food is already out there. Most of us have
heard about such oddities as strawberries protected from frost damage
by a gene transplanted from an arctic fish. But did you know that
genetically modified soybeans now account for 60% of all soy grown in
the U.S.? Called Roundup Ready, the plants were developed by Monsanto
to tolerate Roundup, one of the company's weed-killers. Says Gary
Niery, a farmer in central Illinois: "Before Roundup, we used to use a
quart of herbicide per acre. Now it's just ounces." Similarly
engineered soy plants, including LibertyLink from Aventis, are sold by
other companies.

Close on the heels of Roundup Ready soy came another kind of
genetically altered plant: one that produced its own pesticide. That's
where the Starlink story begins. For nearly 30 years farmers have
sprayed crops with solutions derived from a soil bacterium called
Bacillus thuringiensis. This so-called Bt spray is harmless to humans
but quite effective against a variety of pests, including corn borers.
However, it doesn't kill all corn borers, especially those that often
show up in a second wave of infestation in midsummer. In 1995 seed
companies such as Pioneer Hi-Bred and DeKalb won approval to sell corn
genetically altered to produce the pesticide found in soil bacteria;
this seed killed nearly 99% of corn borers. About 18% of corn planted
in the U.S. last year was of the Bt variety.

One bag of seed corn (enough to plant 2½ acres) costs $90; Bt corn
costs an additional $15 per bag. Corn-borer infestations vary widely
from year to year, depending on wind and rain. If infestations are
mild, it's cheaper to fight the borer with sprays. But in broad swaths
of the Cornbelt where the borer is a chronic problem, the Bt varieties
of seed are more economical. Roughly a quarter of the corn grown last
year in Iowa, Kansas, Nebraska, and Minnesota was of the Bt type; the
figure was 35% in South Dakota.

Pioneer and DeKalb's head start in the Btengineered crop business
worried Aventis, a $20billion-a-year French pharmaceuticals and
agricultural sciences company formed last year by the merger of
Rhône-Poulenc and Hoechst. Although most of Aventis' revenues come
from drugs such as Allegra, a prescription antihistamine, the
company's crop-sciences division had sales of $4 billion last year,
making it one of the biggest agproducts operations in the world. At
least some Aventis officials had big hopes for genetic engineering.
"We were spending $450 million a year on R&D in the agricultural
division," says an executive who, like all Aventis officials
interviewed by FORTUNE, declined to be identified. "We had gone about
as far as you could fighting weeds and pests with chemicals and needed
to make a big shift to biotechnology." Even before their companies
merged, executives at Rhone-Poulenc and Hoechst worried that rivals
were grabbing market share in key agricultural technologies that would
be difficult to win back later.

Buried in the welter of corporate subentities created by the
RhônePoulenc/Hoechst combination was a small Belgian company called
Plant Genetics, which Hoechst had acquired in 1996. Corporate life
cannot have been easy for the managers and scientists at Plant
Genetics, who had been working for a decade on a Bt variety of corn.
Four years before the Aventis merger, Hoechst had formed a joint
venture with Schering, the U.S. drug company. Plant Genetics was
acquired by the joint venture, called Agrevo, which was later folded
again into a division of Aventis. The point here is less the details
than the big picture. There was lots of upheaval at Plant Genetics-its
tiny U.S. headquarters moved through three cities in four years. It is
reasonable to assume, too, that operational details surrounding a corn
gene were hardly the most important concern of senior Aventis
executives trying to manage a $20 billion merger. Until it was too
late.

Although scientists at Plant Genetics were a few years behind the
competition, they were excited about what they had created: a variety
of the Bt protein that destroyed a different part of the corn borer's
gut. This was important because an additional vulnerability would make
it harder for the corn borer to develop resistance to Bt pesticides.
The Bt variety created in Starlink corn was called Cry9. (Bt proteins
have a crystalline shape, so different varieties were called Cry1,
Cry2, etc.) Aventis scientists thought Cry9 was a winner that would
make them significant players in the next generation of agricultural
products. Federal regulators in the U.S. were more cautious.

David Witherspoon of Garst Seed Co. holds a genetically altered
seedling. Garst was the biggest seller of Starlink.

In the early 1980s, when the prospect of bioengineered crops first
emerged, people from numerous U.S. government agencies met to discuss
how to regulate the products. They agreed that the Department of
Agriculture would determine whether a new plant was safe to grow
outdoors: Would it run amok, for example, and harm other plants or
animals? If a genetically altered plant was supposed to produce a
pesticide, the Environmental Protection Agency would decide whether
the plant was safe in food. The Food and Drug Administration would
enforce the food safety standards established by the EPA.

In 1997, when EPA scientists were evaluating Starlink, they saw
something they hadn't seen in other brands of Bt corn. Starlink's Cry9
protein didn't dissolve in stomach acid as quickly as proteins in
other Bt varieties. Nor did it break down as rapidly during cooking or
processing. This meant that the Cry9 protein, unlike the others, might
stay in the stomach long enough to be passed intact into the
bloodstream, where it could trigger an allergic reaction. "Other Bt
proteins lasted only a few seconds in simulated gastric juices," says
Stephen Johnson, deputy assistant administrator of the EPA in charge
of pesticide regulations. "This broke down much more slowly." In other
tests, however, the Cry9 protein seemed fine. "We looked at the
structure of the molecule and asked if it walked and talked like other
known allergens," says Johnson. "It did not. So we were faced with two
of three studies saying there was something different about this
pesticide. We decided we couldn't allow it in food without more
tests."

Starlink's developers, eager to market their product, invoked a
little-known EPA rule that allows some pesticides and herbicides to be
used on feed for animals but not on food destined for humans. This
"split registration" had never been sought for genetically modified
products. Johnson notes. "We looked at each other and said, 'What do
we know about allergens? We know they don't pass through cattle.' We
spoke to USDA and FDA, and they said [Starlink] passes the standard.
We didn't feel real comfortable with it. But the law prevents us from
saying, `We don't like your product.' So we allowed it but put
restrictions on it." For their caution, Johnson says, "we were
denounced as pointy-headed regulators."

The restrictions on Starlink corn were severe. It could be grown only
for animal feed or for nonfood use, such as conversion to ethanol.
Because regulators worried that windblown pollen from Starlink stalks
could pass the Cry9 gene to ordinary corn, farmers had to leave
660-foot buffer strips around their Starlink fields. Farmers bringing
the corn to market had to notify grain elevators that it could not be
used in human food. The EPA ordered Starlink's developers to require
all farmers who bought the seed to sign a form affirming that they
understood the restrictions and would abide by them. The company also
promised to conduct a "statistically valid" survey of Starlink growers
to ensure they were following the rules. Finally, says Johnson, "the
company agreed to accept full liability if anything went wrong."

Neither Aventis nor its predecessor companies ever produced much
Starlink corn. Instead they inserted the newly spliced genes into
small amounts of corn and sold the resulting sprouts to recd
companies. These then planted Starlink in greenhouses, harvested the
corn, and replanted it to create more seed. Eventually the seed
companies contracted with farmers who grow large volumes of corn for
seed under controlled conditions outdoors. Once that seed was
harvested, the companies had enough Starlink seed to begin marketing.

Ultimately, about a dozen small seed companies licensed Starlink corn
from Plant Genetics. The Garst Seed Co., which is near Des Moines and
has one of the longest pedigrees in the seed business, produced the
vast majority of Starlink corn, according to Aventis executives.
Garst, as is common with smaller seed companies, relies heavily on
"farmer dealers" to sell its products. These are usually farmers who
use the slow winter months to schmooze relatives and neighbors into
buying a few thousand dollars' worth of seed. In 1998, the first year
Starlink was on the market, just 10,000 acres were planted. Last year
a mere 350,000 of America's 79.6 million acres of corn were Starlink.
The highest concentration of Starlink in any state last year was 1.1 %
in Iowa, Garst's backyard.

Nevertheless, the proliferation of Bt corn was causing growing concern
outside the Farmbelt. In April 1999 an entomology professor at Cornell
University researching corn-borer resistance to Bt reported that he
had fed a diet of corn pollen to monarch butterflies' larvae. Many of
the monarchs that ate Bt pollen died. This caused a furor among
environmentalists, who admire the monarch for its yearly migration
from Mexico and back. Many environmentalists are profoundly worried
about all genetically altered plants and animals, fearful that they
contain health hazards that won't become apparent for years, or that
they will somehow reproduce wildly and overwhelm ordinary species. For
environmentalists, the monarch was about to become the poster
butterfly of the anti-Frankenfood movement.

Among the environmentalists who led the charge against Bt corn was
Larry Bohlen, an engineer by training and a senior official in the
Washington office of Friends of the Earth. For years FOE and other
greens had been trying to get the U.S. government to sign
international protocols on the use of genetically modified organisms.
"When the Cornell study on monarch butterflies came out, we had our
first tangible example of the kind of impact genetic crops could
have," says Bohlen. He wrote to President Clinton asking that use of
Bt plants be suspended until their effect on nontarget animals could
be determined. And he began writing to consumer-product companies like
Campbell's, Kellogg, and Frito-Lay, urging them to forswear all
genetically modified food. Last July the campaign began in earnest.
Bohlen arranged for popular foods to be tested for genetically altered
ingredients "so we could contact the manufacturers and tell them to be
more careful."

Eventually Bohlen learned about Starlink. "When I asked grain elevator
operators and farmers how Starlink and other unapproved varieties were
being segregated, I was told that separation was difficult and that
very little segregation was being done." Bingo. Bohlen had his
galvanizing image. "By summer it seemed there was a good chance
Starlink had made it into the food supply." In late July of last year,
Bohlen went to the Safeway near his home in Silver Spring, Md., and
filled his grocery cart "with all the corn products I could find." He
sent them to Genetic ID, an Iowa lab that routinely checks commodity
shipments bound for Europe to make sure they comply with European
Union standards. In September the news that Starlink corn had been
found in tacos made by Kraft and sold under the Taco Bell brand was
splashed across the front page of the Washington Post.

David Witherspoon, president of the Garst Seed Co., can't recall where
he was when the news broke. That's surprising, because if anybody
should have been electrified by the development, it was the head of
Garst, which sold nearly all the Starlink produced in the U.S. "We
were very concerned," Witherspoon now says. Aventis executives say
they were flabbergasted and didn't believe the reports at first. A
biotech industry organization immediately questioned the reliability
of Genetic ID. But then Kraft ordered its own tests of the tacos; it
found Starlink and recalled more than a million boxes. Other taco
makers did the same. Kellogg shut down one of its mills because it
feared Starlink contamination. Grain elevators, in the midst of
gathering the fall harvest, scrambled for ways to test arriving
truckloads for Starlink contamination. In many ways it was too late;
most of the Starlink in the nation's food had come from the 1999 corn
crop. And because 1999 had been a bumper year, there were more than a
billion bushels of unsold corn still sitting in silos. No one knew how
much of it was mixed with Starlink.



Illinois farmer Howard Buffets (Warren's son) says Starlink shows the
difficulty of separating subtly different products.

How did this happen? Every farmer who had bought Starlink signed a
form agreeing to keep it out of the human food supply, right? Well,
not exactly. Many of the 2,500 Starlink farmers appear to have been
clueless about it. Hundreds claimed their seed salesmen never told
them they were buying Starlink, and certainly didn't pass on any
precautions about how to plant it. The head of the agriculture
committee of the Iowa House of Representatives, Ralph Klemme, says he
bought Starlink but was never told it was forbidden for use in food.
Thomas Miller, the Iowa Attorney General, says "the vast majority" of
farmers did not sign any forms acknowledging planting and marketing
limits. It was not until a few weeks after the Starlink news broke
that farmers who planted the seed received a letter asking them to
sign and return some forms; the forms appear to have been backdated to
before the spring planting. Aventis executives vigorously deny having
anything to do with the letter. In a telephone interview, Garst CEO
Witherspoon said he would "prefer not to get into that," citing
potential litigation.

Witherspoon insists that Garst provided information to all its
salesmen about Starlink. Asked whether Garst salesmen were diligent
about having farmers sign the EPA-required forms, Witherspoon was
vague. "The dealers would have started getting the forms and would
know we had them. We tried to get them to dealers. We'd remind them to
use them."

It seems unlikely that Garst's farmer salesmen would have knowingly
deceived customers. The seed business relies heavily on the trust that
exists when farmers sell seed to relatives and neighbors. Garst is one
of the oldest companies in the business; it began in 1930 by marketing
hybrid seeds developed by Henry A. Wallace, the founder of Pioneer
Hi-Bred. (Wallace was later Vice President under Franklin Roosevelt.)
Garst was so well known that Soviet Premier Nikita Krushchev visited
its founder, Roswell Garst, on his Iowa farm in 1959. But the company
ran into trouble in the early 1980s, when Pioneer severed its
relationship with Garst to market its own seed. Garst lost the bitter
lawsuit that ensued. The family sold the business to ICI, the British
chemical company, in 1985. (Du Pont bought Pioneer in 1999.) ICI later
spun off its U.S. seed business to Zeneca, a British drug company.
Garst is now a part of Advanta, a joint venture between Zeneca and
Royal Vander-Have Group in the Netherlands. Ironically, Advanta made
headlines in Europe last year when canola seeds it had sold there were
found to contain small amounts of genetically altered material
forbidden by the EU. The seeds, grown in Canada, may have been
contaminated by windblown pollen from other canola nearby.

"I am outraged at Aventis," says Stephen Johnson of the EPA. "This is
enormously important technology. We trusted Aventis to handle it
properly, and they didn't."
Aventis eventually took responsibility for the Starlink mess; the
company is spending millions to locate the rogue corn so that it can
be put into animal feed. Aventis executives say that they thought
Garst was spelling out the restrictions on Starlink to farmers, but
hint that they didn't monitor Garst carefully. Neil Harl, the
agricultural economist at Iowa State, says he doubts Garst was
motivated to be very explicit about how Starlink had to be grown and
sold. "What farmer would buy a variety of seed if he was told he had
to plant a 660foot buffer strip around it, and would have to go
through all sorts of special separation and storage after the
harvest?" Witherspoon disagrees, saying the company sent 15 mailings
to Starlink farmers. As for the "statistically significant" survey of
farmer compliance that Aventis had promised the EPA, the company
appears to have dropped the ball. Garst conducted the survey, says an
Aventis executive, but did it right after the harvest, when most corn
was still stored on farms.

Both Garst and Aventis officials implied in interviews that if they
failed to live up to all their agreements with the EPA, it was because
they were convinced Starlink would soon get full approval for use in
food and that the special conditions would be lifted. "Aventis was
working very hard on those approvals," says Witherspoon.

If Starlink triggers hysteria about genetic food in the U.S., the
world's biggest appetite for that promising technology will dry up,
and the science will be retarded for years.
Even after giving Aventis and Garst their share of the blame, there's
plenty more to go around. Johnson, the EPA official, now concedes that
a split registration for Starlink, allowing it in feed but not food,
was a dumb idea. "It was the first and last time we will allow that,"
he says. Critics point accusingly at the FDA, which was supposed to
enforce food standards established by the EPA. Larry Bohlen at Friends
of the Earth says the FDA didn't even have a way of testing for
Starlink in food and that the agency moved slowly when news of the
contamination first came out. "Kraft ran circles around the FDA. The
day Kraft pulled its tacos off the shelf, the FDA was faxing me to ask
if I would send them some of my taco shells. Kraft had already tested
and confirmed on multiple lots." An FDA spokeswoman declined to
comment on the agency's role in Starlink.

To its belated credit, Aventis has been aggressively trying to locate
Starlink seed. It requested Garst's list of Starlink customers and met
with all of them within days. Aventis is paying farmers up to 25 cents
for each bushel of Starlink seed fed to animals. When grain-elevator
owners discover that a batch of Starlink has contaminated a
million-bushel silo, Aventis negotiates compensation for their added
efforts and expense. The company has also paid for millions of test
kits used by farmers, food processors, and grain handlers to identify
traces of Starlink. Just how much is out there is anybody's guess.
Because many farmers failed to plant buffer strips, pollen sometimes
drifted into neighbors' fields, causing that corn to test positive.
Moreover, some Garst seed varieties that weren't supposed to contain
Starlink turn out to have been contaminated, the company now admits,
and that adds to the difficulty of finding it.

Even though Aventis executives don't argue with assertions that the
debacle may cost the company hundreds of millions of dollars, Wall
Street appears unfazed. Aventis ADRs climbed from $71 to $77 between
early September and late January. Some farmers have fared well too.
Even if they planned all along to feed the Starlink they grew to their
cattle, Aventis is paying them a premium for it.

But the reactions of people like Jerry Rowe are more typical. Rowe
manages the Farmers Grain Cooperative, a four-million-bushel grain
elevator in Dalton City, Ill. He says Starlink has greatly complicated
his life. At peak times he unloads a truck every two minutes. "The
Starlink test takes five minutes per truck, and I can't afford to slow
down." And his sampling probe could miss Starlink lurking in a far
corner of a truck. "Maybe I'll miss it coming in, but the customer
finds it when I'm shipping it out," says Rowe. Corn that Rowe could
sell for $2.14 a bushel to Archer Daniels Midland in nearby Decatur
might get rejected, forcing him to spend 20 cents a bushel to ship it
to Cedar Rapids, where the pay is just $2.06. Rowe also worries that
if he finds Starlink in his bins a year from now, Aventis won't
compensate him. Aventis claims that it will.

The long-term consequences of Starlink seed are hard to predict. No
serious health problems have emerged so far. About three dozen people
complained to the FDA about bad reactions to corn products in the days
after Starlink first made headlines. Many clearly did not have
allergic reactions, and virtually all the rest had mild problems like
itchy eyes or a tight throat. A pediatric allergist from Duke
University told a scientific advisory panel convened by the EPA that
unless someone has an anaphylactic reaction to Starlink, he or she
does not have a food allergy. But the panel decided that Starlink does
indeed walk and talk like a potential allergen, and advised the EPA to
turn down a request by Aventis that small amounts of it be allowed in
the food supply.

Starlink has not triggered widespread hysteria about genetically
modified food in the U.S., to the disappointment, no doubt, of some
environmental groups. But Johnson at the EPA still worries that the
episode may slow the acceptance of genetically modified products. "I
am outraged at Aventis," he says. "This is enormously important
technology. We trusted Aventis to handle it properly, and they
didn't."

He is probably right to be concerned. Pierre Deloffre, head of a large
French vegetable-processing company, told a seed trade convention in
Chicago last December that Europeans turned abruptly away from
genetically modified foods during the 1990s. Deloffre blames
government regulators and scientists who failed to respond properly to
Chernobyl, AIDS in the blood supply, and mad cow disease for eroding
Europeans' confidence in technology. "Five years ago the first
boatloads of genetically modified soybeans arrived here without the
slightest reaction," says Deloffre. Now the EU barely touches them.

Although Europe hasn't imported much American corn for years, Japan is
a large customer. The Japanese have been fairly tolerant of
bioengineered food, but they, too, are growing cautious. New rules
that take effect in Japan this spring will require labels on food to
state if it contains genetically modified ingredients. An executive at
ADM says orders from Japan for unmodified corn and soy have already
begun to climb in anticipation of the new labels.

Since it caused no serious illnesses, Starlink will probably be a
footnote in future agronomy textbooks. In reality, though, this was a
disturbingly close brush with disaster. Starlink was probably
circulating in the food supply for a year before it was found. If it
had been slow acting but truly dangerous, like mad cow disease, the
damage could have been enormous. Critical links in the food chain from
Aventis and Garst to thousands of small farmers-turned out to be
either unconcerned about or oblivious to what they were selling and
growing.

If we're lucky, maybe Starlink will also be a wake-up call, reminding
us that tinkering with Mother Nature is risky business -and that it's
not just white-coated lab technicians who must be careful. Solving the
problem of hunger and malnutrition may ultimately depend not so much
on science as on our faith in science and all its stewards. And if you
can't trust a farmer, who can you trust?

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