South America Calling

Monsanto and Argentine farmers are locking horns over royalties on the new Intacta RR2 Pro soybean technology.

The controversy surrounds the St. Louis-based biotech giant's strategy of getting crushers and exporters to charge farmers royalties, at $15 per metric ton, on purchases of grain.

Farmer groups say the proposal is abusive and are recommending their members don't pay. Monsanto says it's merely charging for use of its technology within the laws.

According to Argentine seed law, farmers are allowed to produce seed for their own use.

As a result, pirated first-generation Roundup Ready soybeans were ubiquitous even before the government ruled Monsanto could no longer charge royalties on the technology in 2006.

Monsanto was determined not to be outmaneuvered again and included a clause in the sales contracts for the new insect-resistant Intacta obliging farmer to pay royalties on seed produced on the farm.

Farm groups called foul.

"The system (of charging post-harvest) is contrary to the Argentine legal system," said the four main Argentine farm groups in a joint statement in mid-April.

Grain purchasers aren't too happy about the situation either.

"This gets in the way of our relationship with the farmer... We would retain money that isn't ours," said Fernando Rivara, president of the Argentine Grain and Cereal Processors Association.

However, a significant portion of exporters have signed agreements to collect royalties under the threat that cargoes could be embargoed at European ports for piracy.

It appears the Argentine government may be set to weigh in on the argument. Bloomberg News on Wednesday reported an unnamed government official saying that the state would prohibit the charging of royalties post-harvest.

Argentina is in the process of harvesting a record soybean crop, pegged at 59 million metric tons by the Rosario Cereals Exchange.

Monsanto has not officially estimated what percentage of the 50 million acres of soybeans planted this season were Intacta in its first year of widespread commercial planting. But analysts put the figure at around 5%.

Since the technology is new, the percentage of home-produced seeds is relatively small. Royalties were paid on 70% of the Intacta seeds used this year, a Monsanto spokesperson told Bloomberg.

But Intacta has proven very popular with farmers in Brazil and Argentina, as much because of yield potential gains as for the caterpillar resistance, and planted area will likely expand aggressively next year. Monsanto forecasts planting will double across South America in the 2015-16 season to 30 million acres.

In Brazil, grain purchasers collected royalties for Monsanto on first-generation Roundup and are in negotiations over the fee they will charge to do so for Intacta.

The situation in Argentina is slightly different. As the world's No. 1 soymeal and soyoil exporter, Argentina processes most of its beans, and crushers don't believe Monsanto can claim piracy on meal and oil. However, many companies do export at least some beans, and multinational firms are nervous about an Argentina dispute with Monsanto.

This is a story that will continue to run.

(AG)

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