Monsanto, BASF in $1.5 bln
genetic seeds venture
Wednesday, March 21, 2007
Wednesday, March 21, 2007
By Laura Mandaro
SAN FRANCISCO - U.S. seed company Monsanto Co. and German chemical giant BASF Ag on Wednesday announced a $1.5 billion partnership to develop more genetically modified crops to meet growing demand for vegetable-based fuels.
St. Louis-based Monsanto which currently has the lead on selling corn seeds with biotech traits to North American farmers, will pair a roster of eight seed traits with BASF`s early-stage research and database of 35,000 plant genes.
"This is the Google dedicated to genetics," said BASF Chairman Jurgen Hambrecht in a conference call to discuss the venture.
The two companies will equally share funding up to $1.5 billion in costs to develop genetic traits that increase yields and hardiness from corn, soybean, cotton and canola crops.
They aim to start selling results of the collaboration in the first half of the next decade, with Monsanto slated to receive 60% of net profits from partnership and BASF taking 40%.
Monsanto is in the third season of selling its triple-stack corn seeds, which carry genetic alterations designed to protect plants from above- and below-ground insects plus weedkillers like its own Roundup.
As farmers seek richer harvests to meet expected demand for corn ethanol, Monsanto anticipates farmers will expand their purchases of these higher-yielding crop seeds. Monsanto has forecast 35% of U.S. corn seed sales sold under its national brands could be in triple stack this year, up from about 20% last year.
On Wednesday, the two companies positioned their venture as a way to solve the industrialized nations` growing desire to replace fossil fuels with ethanol and other vegetable fuels made from the same crops now devoted to food.
"The real dilemma will be how do you grow more with less," said Monsanto CEO Hugh Grant.
The companies said recent environmental mandates in the United States and Europe to replace fossil fuels with vegetable oils will only up the ante on farmers to increase crop production.
President George W. Bush says he wants the United States to reduce its annual gasoline use by 20% in 10 years, a target the U.S. ethanol industry says will only be possible by making the gasoline substitute out of other domestic crops beside corn.
The European Union wants to make biofuels over 5% of total transportation fuel by 2010.
"There is the conflict of food on one side and renewable energy on other. The only solution for that is plant biotechnology," said Hambrecht.
Grant downplayed the risk their products could meet regulatory roadblocks in Europe, where the notion of genetically modified crops has met with stiffer resistance from a public that has labeled such crops as "Franken foods."
He said last year at least six countries, including France and Germany, planted crops with seeds genetically modified to resist insects.
"The thing that often gets overlooked is that we`re 10 years into this," he said. "The next decade will be somewhat easier," he said.
At the same time, executives said having a partner in the European Union could help Monsanto gain more access to the European farming market.
Both companies are betting that competing demand for crops from food manufacturers and energy companies will push farmers toward their genetically altered seeds.
"The question farmers have to ask themselves is can they remain competitive long term if they don`t have access to the best tools," said Peter Oakley, a member of BASF`s board of directors.
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