The Argentine government is stepping into a battle between farmers and Monsanto Co. over royalties the U.S. company wants to collect for genetically modified soybeans.
Argentina, the world’s third-largest soybean producer, plans to bar grain handlers from collecting royalties after the harvest on behalf of seed developers such as Monsanto, according to an agriculture ministry official who asked not to be named because of ministry policy.
The government’s planned decree comes as farmers conclude their first growing season using Monsanto’s Intacta soy, developed for the South American market to combat insects and withstand Roundup weedkiller.
Monsanto said it’s not aware of any government order regarding royalties. The St. Louis-based company has signed agreements with “a significant number” of grain handlers and ports in northern Argentina to collect Intacta royalties, said Victoria Manny, a Buenos Aires-based spokeswoman for the company. More than 70 percent of the growers paid the royalty in advance when they bought their seed, she said in an e-mail.
“We believe that the technology and licensing system provides enormous benefits to farmers in Argentina and is fully compliant with all local laws,” Manny said in the e-mail. “We continue to receive great feedback from growers on the technology.”
The company had been betting that Intacta, which is under patent in Argentina, would allow it to collect soybean royalties in the country for the first time in more than a decade.
Argentina lets farmers use Monsanto’s older technology, Roundup Ready soybeans, without paying an annual royalty to the company, making pirated varieties cheap and ubiquitous.
Monsanto exceeded projections by selling enough Intacta seeds during the last growing season to plant 15 million acres in Argentina and Brazil, the second-biggest producer, the company said April 1. It expects to sell 30 million acres of Intacta in Latin America in the fiscal year that begins in September, with sales in the region eventually reaching 100 million acres annually in what the company has called “the decade of the soybean.”
Monsanto has said Argentina “is a very significant” growth opportunity. The country expects to produce 59 million metric tons of soy in the 2014-15 season. The U.S. is the top producer.
Argentine farmers now may decide to grow their own Intacta beans and replant them the following year without paying Monsanto, eroding the forecast sales bump, said Matt Arnold, a St. Louis-based analyst at Edward Jones & Co. who recommends holding Monsanto shares.
“It’s disappointing to see the company invest in R&D, come up with technology that provides a benefit, and then not get compensated for it,” Arnold said by telephone Wednesday.
Monsanto was unchanged at $115 in New York. The shares have dropped 3.7 percent this year.
The Argentine Rural Confederation, the country’s largest farmers association representing 109,000 farmers, has advised members to reject the “abusive” option of paying royalties for future output when buying seeds.
Argentina has a decree prepared and will implement it if seed producers insist on signing contracts with farmers to charge fees on seeds delivered to handlers, the government official said.
While the government is in favor of farmers paying for biotechnology, charging additional royalties on future crops would contravene regulations, the official said. Under Argentina’s seed law, farmers who buy a seed own the output.
Authorities have given Archer-Daniels-Midland Co. and Cia. Argentina de Granos, or Cagsa, which buy oilseed from farmers, until May 4 to submit copies of any contracts signed with seed companies that include retention of royalties, the Agriculture Ministry official said.
Rodrigo Shimabukuro, a spokesman for Chicago-based ADM in South America, didn’t respond to requests for comment made by telephone and e-mail. Joaquin Piedrabuena, a Cagsa spokesman, said he had no immediate comment when reached by telephone in Rio Cuarto, Argentina.
“If the government wants the contracts we have signed with farmers, grain handlers and exporters, with pleasure we would provide them,” Manny said by telephone.