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Monsanto Eyes 2013 Launch For New Soybean Seeds In Argentina
24-August-2012 Dow Jones Newswires via Fox Business
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Agricultural-biotechnology company Monsanto Co. (MON) is optimistic it will be able to collect royalties in Argentina from its second generation of genetically modified soybean seeds despite getting stiffed in the past.

Monsanto aims to start selling the new seeds--which have the combined traits of resistance to insects and the herbicide glyphosate--in October 2013, Pablo Vaquero, Monsanto's director of sustainability and corporate affairs for Latin America south, said in an interview.

But its plan hinges on reaching a royalty agreement with farmers, seed merchants and exporters over the course of the next year, Mr. Vaquero said.

Monsanto is currently running about 80 different seed trials in Argentina to see if the new seed--Intacta RR2--lives up to the expected higher yields.

In Brazil, Monsanto's tests of the new seeds have lifted yields by up to 15%. Argentina's Agriculture Ministry this week said that kind of yield boost could increase the country's soybean output by five million metric tons.

The seeds are slated to go on sale in Brazil for the 2012-13 season once China approves imports of soybeans grown from the seeds, which is expected shortly, Mr. Vaquero said.

The U.S., Brazil, Argentina and Paraguay dominate global soybean exports, while China is the world's top importer. Demand for soybeans has surged in recent years for use as animal feed to sate the world's growing hunger for meat.

Monsanto has been able to enforce royalty rights for its genetically modified soybeans in all the top-producing nations except Argentina. The company is shifting its focus to Intacta RR2 now as the U.S. patent on its first generation of soybean seeds runs out in 2014.

Monsanto failed to obtain a local patent for the soybean seeds it introduced in Argentina 15 years ago and its efforts to collect royalties have been foiled by local regulations. Virtually all of the soybeans grown in Argentina are based on Monsanto's technology.

However, Argentina is now working on a new seed law to protect intellectual-property rights for agricultural biotechnology.

Monsanto has a patent for the new seeds in Argentina but, under local law, farmers don't have to pay royalties on seeds they grow and hold back for the next planting season.

"We've decided to move forward on a seed law draft, as corresponds in a country that aspires to be a leader in food production," Agriculture Minister Norberto Yauhar said in a press release Tuesday.

"We're looking to protect intellectual property in the development process," Mr. Yauhar said, adding that the bill will be sent to Congress for debate in the coming months.

That could be good news for Monsanto.

The new law would seek to clarify who qualifies as a "small-scale" farmer who can legally reuse seeds from his own crop, Mr. Vaquero said.

The rest of the users would have to pay the companies that developed the seed technology.

"We want all farmers to play the same game and not cheat us," he said.

But Argentines have a long history of flouting attempts to collect intellectual-property fees on everything from DVDs to soybeans.

"Controls are very weak, with lots of unlicensed wheat and soybean seeds sold in unmarked bags each season," Mr. Vaquero said. "It's not clear how the government is going to control the protection of technology rights."

With that in mind, Monsanto is working to reach an agreement with farmers, exporters, and seed merchants to collect royalties when farmers deliver their grain to market.

A similar system has been working well in neighboring Brazil. The source of the soy can be checked relatively easily and fees collected when the beans are delivered to exporters and processors.

Monsanto's pending introduction of Intacta RR2 comes at a good time. Farmers in its key South American markets are getting ready for bumper crops in the upcoming 2012-13 season, thanks to the heavy rainfall that the El Nino weather phenomenon is expected to bring.

In addition, Monsanto is a major provider of genetically modified corn seed and sees major growth opportunities in that business in Argentina, Paraguay and Uruguay in the coming years, Mr. Vaquero said.

A devastating drought in the U.S. has boosted grain prices and made corn a good option in South America. The margins for corn cultivation are better than those for soybeans right now and many farmers need to plant corn to rotate crops on their fields, Mr. Vaquero said.

The U.S. drought has also hit seed production, and many of the corn seeds U.S. farmers will plant next year will be grown in Argentina and Chile, he added.

In June, Monsanto said it plans to build a $100 million plant to produce corn seeds in the heart of Argentina's corn belt in Cordoba Province. Monsanto already operates a similar plant in Buenos Aires Province.

Write to Shane Romig at shane.romig@dowjones.com.

 
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