An appellate court in Mato Grosso yesterday upheld an injunction requested by a group of growers to stop fee collections in the state before a trial challenging patents for the genetically modified beans. Monsanto will temporarily suspend the collections nationwide to “maintain operational consistency,” the St. Louis-based company said today on its website.
Growers say the patent on the original Roundup Ready soybeans expired in 2010, ending their obligation to pay Monsanto a technology fee on the seeds. Monsanto says that Brazilian law extends the patent to 2014, when it expires in the U.S. Monsanto is counting on growth in Latin America, particularly Brazil, to meet its earnings forecast.
“Today’s events will have to cause investors to consider the potential impact of an earnings hit in 2013,” Jason Dahl, who co-manages the Victory Large Cap Growth Fund (VFGAX), including Monsanto shares, said today in a phone interview from New York. “They have a good track record of defending their patents historically.”
Monsanto fell 0.9 percent to $89.63 at the close in New York. The shares have gained 28 percent this year.
About 20 cents a share of earnings are at risk in fiscal 2013, which began in September, based on 50 million acres of Roundup Ready soybean sales, Vincent Andrews, a New York-based analyst at Morgan Stanley, wrote in a note today. In a worst case scenario, Monsanto also wouldn’t collect fees in 2014 and would have to repay 2011 royalties, he said.
“This creates some uncertainty and investor unease about the Brazilian soybean market,” wrote Andrews, who rates the shares overweight, the equivalent of a buy. “Prevailing patent law is in the company’s favor.”
Monsanto said it expects appellate courts to decide whether collections can resume over the next several weeks, prior to the start of the trial in state court.
The outcome of the case won’t effect sales of Intacta soybeans, a newly patented product engineered to produce insecticide and tolerate Roundup herbicide, Andrews said. Farmers are currently testing Intacta beans prior to full commercial sales next year.
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