Saturday March 31 7:53 PM ET
Monsanto Moving GM Food Forward

By Carey Gillam

CHESTERFIELD, Mo. (Reuters) - The six-story brick buildings housing Monsanto Co.'s chief scientific research facilities look like a typical office park.

Until you glance up.

Two acres of greenhouses packed with leafy green plants perch atop the complex, testament to Monsanto's hope that as high-tech crops stretch for the sun, profits will likewise grow.

Long a leader in the revolutionary changes taking place in agriculture, St. Louis, Mo.-based Monsanto has become a hero to farmers by providing products that improve production of key crops such as corn, soybeans and cotton.

But the company's efforts to give Mother Nature a hand have made it a villain to those who see biotechnology as a threat to the safety of food and the environment. Lawsuits and protests have dogged Monsanto's genetic seed work, and mounting financial pressures led the company last year to form Pharmacia Corp. in a merger with Pharmacia & Upjohn.

Now, newly restructured and reinvigorated with an October public offering as a Pharmacia agricultural products spin-off, Monsanto is seeking a fresh start, but facing a murky future.

``Its been a very innovative company coming up with new products and new ways of doing business in ways other folks probably had never even imagined were possible,'' said Food and Agricultural Policy Research Institute economist Pat Westhoff. ''But they definitely face a number of hurdles.''

Seeds Of Promise

The company's claim to fame is Roundup, the world's No. 1 herbicide, whose ability to annihilate weeds is beloved by backyard gardeners as much as it is depended on by farmers.

Last year, net sales of Roundup and related herbicides were $2.6 billion, 48 percent of total company net sales.

But the U.S. patent on the key ingredient in Roundup expired in September, opening Monsanto's bread-and-butter product line up to increased competition and price pressure.

To hold onto market share, the company is reducing prices on its Roundup products and introducing new variations. But it also is putting an increasing reliance on expanding markets for its ''Roundup Ready'' crops, which are genetically transformed to resist the weedkiller, allowing farmers to kill weeds easily without damaging crops.

Genetically modified (GM) corn and soybeans have soared in popularity in the U.S. farm belt since debuting in the mid-1990s, and helped increase Monsanto's sales of Roundup herbicide products. Last year, planting of Monsanto biotech seeds grew by more than 15 percent to 103 million acres.

Monsanto is now seeking regulatory approval to introduce a Roundup Ready wheat seed to the market. Also in the pipeline are Roundup Ready rice and alfalfa seeds. More distant plans include GM plants that produce vaccines.

``We're beginning to look at plants as factories... where you can deliver things to improve people's health,'' said Monsanto director of scientific outreach Eric Sachs.

Fighting ``Franken-Foods''

But as Monsanto presses ahead, global debate about the safety of genetically modified crops shows no signs of easing. Opposition to Monsanto has been particularly virulent in Europe where GM crops have been snagged in the regulatory approval process for years and labeled ``Franken-foods'' by opponents.

Last weekend, Italian police seized about 120 tons of maize suspected of being contaminated with unapproved genetically engineered material from Monsanto.

And in January, more than a thousand protesters stormed a Monsanto experimental farm in Brazil, yanking out GM corn and soybeans crops at Monsanto's experimental farm.

Though less vocal, U.S.-based GM opponents are also active. Last week, protesters picketed Starbuck Corp.'s annual meeting, demanding the company halt use of genetically modified soy and corn products and milk produced with bovine-growth hormones.

Last year, protesters convinced McDonald's Corp. and other fast-food chains to stop using Monsanto's genetically modified potato, a product the company has since shelved.

And while U.S. wheat growers say they would welcome the production efficiencies they might gain from Monsanto's new GM wheat variety, they fear the loss of world wheat sales.

``The name Monsanto has been made synonymous with everything bad and ugly about biotechnology,'' said Worldwatch Institute researcher Brian Halweil.

A Fresh Face

Monsanto is determined to ride out the GM backlash and has adopted a new low-key approach heavy on education and outreach, and light on the aggressive promotional moves of years past.

It also has slashed costs, cut back on GM research and narrowed its focus in a restructuring that last year resulted in a pre-tax charge of $261 million. The company cut 460 employees from its workforce in 2000 and is cutting at least 235 employees this year.

Monsanto officials said earlier this month that the company expects sales growth in 2001 of about 5 percent, the same as 2000, based on expected increased sales of seeds and Roundup herbicide, as well as higher revenues from biotechnology traits. But the company's future growth potential remains an open question, many say.

Lehman Brothers analyst Sergey Vasnetsov has a hold rating on the stock, and said the ``dark clouds of negative public perception'' loom large. He and other Monsanto watchers all say only time will tell how Monsanto's fortunes will fare.

Monsanto officials have acknowledged missteps in the past and are respectful of the tenuous ground they now walk on.

``There are several things we need to do to continue to be a successful company,'' said spokeswoman Lori Fisher. One of those is ``carrying out the biotechnology acceptance strategy. Longer term that would be key to our company's future.''

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