By P.J. Huffstutter and Tom Polansek
CHICAGO, May 18 (Reuters) - A day after Monsanto Co said it would stop the launch of its latest soybean trait in Argentina due to concerns over royalty payments, company executives downplayed the impact and sought to turn the focus to business prospects in neighboring Brazil instead.
Brazil is “the real opportunity” for growth in South America for Monsanto’s newest soy technology, known as Roundup Ready 2 Xtend, President Brett Begemann told investors at the BMO Capital Markets’ conference in New York on Wednesday.
Monsanto Chief Commercial Officer Michael Frank, speaking at a separate investor conference, said the aborted soybean launch does not impact the rest of the company’s business in Argentina.
Monsanto’s dispute with the country revolves around a key issue: a lucrative revenue stream of royalties farmers typically pay to the company to save crops with genetically modified traits to reuse as seeds.
In Brazil, after a long dispute over the issue, Monsanto has negotiated agreements with soybean trading firms to collect such royalties for the seed giant.
But Monsanto and the Argentine government have been at loggerheads since the start of harvest in March, over the best way to inspect soy cargoes to ensure royalties have been paid on Monsanto’s Intacta variety of soybeans.
The government says Monsanto has yet to submit a proposal for an inspection system. The company says it is waiting for the government to outline its inspection requirements. The inspections could involve private-sector companies.
“We’re not going to sit back and let Argentina steal technology and Brazil pay for it. That’s wrong. That’s just ethically wrong,” Begemann told Reuters on Wednesday.
South America is a key market for Monsanto, which has been battered by a plunging market value, controversy about whether its glyphosate weed killer causes cancer, and a failed bid for rival Syngenta AG. The company has also been rumored to be a takeover target.
Brazil, the world’s biggest soybean exporter, accounted for $1.73 billion in Monsanto’s net sales in fiscal 2015, or nearly 12 percent. Argentina, the No. 3 soybean exporter, was $871 million, or 5.8 percent. The company declined to say how much came from soybeans.
Monsanto sees its Xtend soybeans line as a potential blockbuster, but the launch has been problematic.
The seeds are genetically engineered to resist the herbicides dicamba and glyphosate. They are being sold for the first time in the United States and Canada this year, despite lingering regulatory hurdles in the United States and the European Union.
The company has lowered its forecasts for the likely amount of land to be planted with the new seeds in both the United States and Canada, where planting is underway.
In Argentina, Begemann said, Monsanto was further behind in its seed launch. Xtend would not have been planted there until this November, during the Southern Hemisphere’s spring.
Begemann told Reuters on Wednesday that he was confident Monsanto would get EU import approval “before we would have a marketing problem.” He emphasized that Monsanto’s decision this week had nothing to do with the EU.
While Monsanto is reviewing its whole business model in Argentina, corn is not part of the royalty dispute. Frank told the Goldman Sachs Basic Material conference that farmers there do not save corn seed, because it would not deliver high yields. That avoids a dispute over the intellectual property of corn technology.
While farmers and the government object to private sector actors playing such an enforcement role for soybeans, some Argentine growers urged their government to strike a deal with Monsanto.
“Not having Xtend is going to be terrible for the country,” said Ruben Sgalippa, owner of a family farm in the bread basket province of Buenos Aires. (Reporting by P.J. Huffstutter and Tom Polansek in Chicago. Additional reporting by Rod Nickel in New York, and Hugh Bronstein in Buenos Aires; Editing by Diane Craft and Tom Brown)