South America Calling

Brazil's National Agricultural Confederation (CNA), the country's largest farm group, has backtracked on its support for a deal that Monsanto proposed to end a dispute over royalties on first-generation Roundup Ready soybeans (RR1).

The change of heart was triggered by Monsanto conditioning the deal on the reinforcement of patent rights for Intacta RR2 Pro (RR2) soybeans, which the world's No. 1 seed company hopes to introduce next season.

The news is a blow to the St. Louis biotech giant, which had hailed the bolstering of RR2 royalty rights in the world's fastest-growing soy market as a coup.

Back on Jan. 23, Monsanto, CNA and 10 state farm federations, issued a declaration endorsing a deal under which the company suspends royalties on RR1 soy for this season and next. In return, farmers agreed to waive legal challenges to the collection of royalties over the last two years.

It's a down-the-middle compromise between competing patent claims. Monsanto argues its international patent, which expires in 2014, applies in Brazil, while farm groups claim a local patent, which expired in 2010, takes precedence -- a position that had gained some traction following a favorable Mato Grosso court decision last year.

The declaration was only an endorsement of general terms, and farmers had to sign off on the deal individually. Meanwhile, farm groups in Mato Grosso, the No. 1 soy state, rejected the accord, arguing that they have a strong case on the royalties.

However, the CNA says the individual agreements that Monsanto is asking farmers to sign vastly overreach the general terms of the declaration.

"CNA rejects the individual agreements that Monsanto is presenting to soybean producers," it said in a statement late Wednesday.

The royalty accord offered to individual farmers not only asks them to waive legal claims on past RR1 royalties, it also obliges them to recognize Monsanto's right to charge royalties on the sale of RR2 seed, or on the resultant soybeans.

While CNA correctly says the declaration made no mention of RR2 undertakings, Monsanto did publish the terms of the individual contracts on the day of the declaration. As such, most took the document as an endorsement of the contracts and it seems barely plausible that CNA signed without seeing them.

What appears to have happened is that the CNA has taken a harder look at the legal implications of agreeing to royalty collection on RR2 production, as well as seed sales, and reviewed its position.

I reached out to CNA for further explanation of their apparent volte-face, but, at the time of writing, they hadn't got back to me.

In the statement, CNA expressed its 'repudiation' of Monsanto's actions and demanded the annulment of all individual contracts signed since Jan. 23.

It claimed Monsanto had given verbal assurances that the contracts would be ripped up, but a company spokesman refused to confirm that information Thursday morning.

However, Monsanto does appear willing to give some ground. In a three-line statement, it said it maintains 'an open dialogue' with CNA and the federations and had today sent them proposed changes to the individual accords.

The biotech firm wanted to end the imbroglio over RR1 royalties before the launch of RR2, scheduled once Chinese authorities approve the technology.

This agreement with CNA had gone some way to doing that. Now that prospect seems further off.

(AG)

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