Organic Consumers Association

More on Monsanto's Cutback of Controversial Cow Hormone

January 27, 2004
New York Times

Maker Warns of Scarcity of Hormone for Dairy Cows

genetically engineered growth hormone for cows that is widely used to
increase milk production will be in severe short supply this year, its
manufacturer, Monsanto, has told dairy farmers.

In letters to farmers and a press release to dairy industry publications
Thursday, Monsanto said that customers would be allocated 50 percent of the
amount of the hormone that they had bought in the past. The allocation,
beginning March 1, is expected to last all year.

A Monsanto spokeswoman, Janice Armstrong, said the cutback came after a Food
and Drug Administration inspection in November of the factory at which the
product was made. The F.D.A. found that more batches of hormone than
expected were failing the factory's quality control tests, she said.

Although those batches were not sold, Ms. Armstrong said, the factory, which
is in Austria and is owned by Sandoz, must make changes to correct the
problems, cutting into output.

The growth hormone, known as bovine somatotropin and sold under the name
Posilac, is used in 22 percent of the nation's dairy cows, according to a
2002 survey by the Department of Agriculture. Injected once every two weeks,
the hormone can increase a cow's milk output by 10 percent to 15 percent,
according to the company and to farmers.

The product, which has been sold in the United States since 1994, has not
been approved in Canada and Europe, primarily because it can cause health
problems in cows. The F.D.A. has said that milk from cows treated with the
hormone is indistinguishable from milk from untreated cows.

The shortage of growth hormone could tighten supplies of milk a bit, and
milk futures prices surged last week in response. Steven A. Larson, managing
editor of Hoard's Dairyman, a trade publication, said, however, that the
Posilac cutback "would be pretty far down the list" of factors determining
milk supply.

Lloyd Holterman, a dairy farmer in Watertown, Wis., said that although the
cutback would hurt his milk output, the rise in milk prices would offset
that. "We like the high price, so I can't be totally negative," he said.

Monsanto, which is the only supplier of the hormone, told customers in
December that it would cut supplies by 15 percent. But the company now says
the manufacturing changes will have a greater effect on output than it
initially thought.

Monsanto has shifted some production of the main ingredient to a new $180
million factory in Augusta, Ga., but that factory has not received approval
to make the final product.

Monsanto, based in St. Louis, also told farmers last week that it was
increasing the price of Posilac by 9 percent. It said the increase, the
first for the product, was independent of the supply shortfall.

Andrew Kimbrell, executive director of the Center for Food Safety, a
Washington group that has tried to have the hormone removed from the market,
called the production cutbacks "good news for dairy cows and good news for
consumers, though obviously a body blow to Monsanto."

But Kevin W. McCarthy, an analyst at Banc of America Securities, said
Monsanto would not be hurt much because Posilac, even before the cutbacks,
accounted for what he estimates at $250 million to $300 million in annual
sales, or about 5 percent of the company's expected total this year.

"I don't think this is a business investors are particularly focused on, nor
should they be," said Mr. McCarthy, whose firm has done investment banking
for Monsanto. Monsanto does not break out sales of Posilac.

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