Argentina Crop Outlook - 4

By Alastair Stewart
DTN South America Correspondent

MAR DEL PLATA, Argentina (DTN) -- Argentina has been a headache for biotech companies for many years.

As the world's No. 3 soybean producer and a major exporter of wheat, it represents a massive market for seed technology.

But an antiquated seed law and a huge black market for seeds mean companies struggle to get paid for the use of their technology.

The election of a new business-friendly president, Mauricio Macri, in December raised expectations that Argentina might turn a corner and start defending the intellectual property rights of the biotech firms more forcefully.

The public declarations of key officials seem to encourage those hopes.

Argentina must get rid of the black market, of informality in the seed market, Argentina's new Agriculture Minister Ricardo Buryaile told a wheat conference in Mar del Plata last week.

"We want an end to the differences between the farm and the industry (that serves them) ... We need to be more transparent," he said.

Encouraging words.

But, in practice, the Argentine government currently remains at odds with biotech on the biggest issue: Monsanto's collection of royalties on its Intacta RR2 soybean technology.

MONSANTO KEEN TO COLLECT ROYALTIES

After seeing its first-generation Roundup Ready technology pirated on a massive scale in Argentina, the St. Louis-based ag tech giant was keen to establish its own system to collect royalties on its second-generation Intacta technology, which stacks insect resistance on top of glyphosate resistance.

As such, in addition to charging royalties on seed sales, Monsanto has strong-armed exporters and elevators into testing on the delivery of unlicensed soybeans and is charging $15 per metric ton on cargoes with Intacta traits. It's a system that has been in place since the 2014-15 harvest.

Some kind of post-harvest collection system is necessary, because only around 15% of Argentine soybean seeds are bought from licensed sellers. Under Argentina's 1973 seed law, farmers are allowed to save seed for their own use during the next harvest. Farm groups argue they don't have to pay royalties a second time on the home-produced seed. Monsanto doesn't agree and included clauses in seed sales contracts demanding payment on saved Intacta seeds.

LARGE BLACK MARKET FOR SEEDS

But the real problem is the size of the black market in seeds after decades of lax inspection. Due to the illicit nature of this business, it is difficult to work out what percentage of area is planted with irregular seeds, but it is very large.

Sales of Intacta in Argentina were poor in 2015-16, with the new technology covering around 10% to 15% of the country's 50 million acres of soy. But the suspicion is that Intacta sales exploded on the black market, just as happened following the arrival of RoundUp Ready nearly two decades before, said one farm leader, who insisted on anonymity.

"The Intacta crop may actually be quite large," he said.

The Agriculture Ministry is committed to tackling the problem, said Guillermo Bernaudo, head of cabinet at the Agriculture Ministry.

He noted that data compiled from large farms show there are 1.5 million hectares (3.7 million acres) for which the variety of soybean seed used is not declared, while there are 22 seed companies seemingly selling unregistered seeds.

So this government is much more sympathetic to Monsanto than the previous administration of leftist, populist Cristina Kirchner and, according to farm leaders, an agreement on an officially sanctioned system of royalty collection is close.

TENSE NEGOTIATIONS

However, negotiations have grown tense.

Seemingly frustrated with Monsanto, Buryaile announced in mid-April Intacta testing could only proceed with government approval.

In practice, the measure had little impact and most exporters continued testing, concerned that Monsanto could sue them abroad, said one source.

Then last week Monsanto openly declared it would disregard the prohibition and continue testing. It followed up this week by sending invoices to the Argentine Federated Farmers (AFA) cooperative charging royalties on beans delivered in elevators.

Meanwhile, Michael Frank, chief commercial officer at Monsanto, told an investor conference in the U.S that the company could pull its biotech soybean seeds out of Argentina, according to the Wall Street Journal.

Buryaile said last week that the solution should involve seed registration with the local grain exchanges.

In truth, Argentina needs a new seed law that deals with these issues. The government has promised to send a new seed law to Congress, but that will take time.

Alastair Stewart can be reached at astewartbrazil@gmail.com

(ES/CZ)

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