6 February 2009
How one of the top 10 US chemical companies used the world's biggest selling pesticide to turn itself into a GM giant in order to try and escape its past
Monsanto was created in 1901. The company's first product was the artificial sweetener saccharin. In the 1920s Monsanto expanded into basic industrial chemicals. During the Second World War Monsanto contributed to research on uranium for the Manhattan Project, which lead to the atomic bomb. Monsanto continued to operate a nuclear facility for the U.S. government until the late 1980s. During the 1940s Monsanto also become a leading manufacturer of synthetic fibres and plastics, including polystyrene – ranked fifth in the EPA’s list of chemicals whose production generates the most total hazardous waste. From the 1940s onwards Monsanto was one of the top 10 US chemical companies.
Agent Orange and dioxins
Following the Second World War, Monsanto championed the use of chemical pesticides in agriculture. Its major agrochemical products have included the herbicides 2,4,5-T, DDT, Lasso and Agent Orange, which was widely used as a defoliant by the U.S. Government during the Vietnam War and which was later shown to be highly carcinogenic. The Agent Orange produced by Monsanto had dioxin levels many times higher than that produced by Dow Chemicals, the other major supplier of Agent Orange to Vietnam. This made Monsanto the key defendant in the lawsuit brought by Vietnam War veterans in the United States, who faced an array of debilitating symptoms attributable to Agent Orange exposure. Internal Monsanto memos show that Monsanto knew of the problems of dioxin contamination of Agent Orange when it sold it to the U.S. government for use in Vietnam.
Agent Orange contaminated more than 3 million civilians and servicemen, and an estimated 500,000 Vietnamese children have been born with deformities attributed to Agent Orange, leading to calls for Monsanto to be prosecuted for war crimes. No compensation has been paid to Vietnamese civilians and though some compensation was paid to U.S. veterans, according to William Sanjour, who led the Toxic Waste division of the U.S. Environmental Protection Agency, “thousands of veterans were disallowed benefits” because “Monsanto studies showed that dioxin [as found in Agent Orange] was not a human carcinogen.” An EPA colleague discovered that Monsanto had apparently falsified the data in their studies. Sanjour says, “If [the studies] were done correctly, they would have reached just the opposite result.”
The birth of Roundup
The success of the herbicide Lasso had turned around Monsanto's struggling Agriculture division, and by the time Agent Orange was banned in the U.S. and Lasso was facing increasing criticism, Monsanto had developed the weedkiller “Roundup” (active ingredient: glyphosate) as a replacement. Launched in 1976, Roundup helped make Monsanto the world's largest producer of herbicides.
The success of Roundup coincided with the recognition by Monsanto executives that they needed to radically transform a company increasingly under threat. According to a recent paper by Dominic Glover, “Monsanto had acquired a particularly unenviable reputation in this regard, as a major producer of both dioxins and polychlorinated biphenyls (PCBs) – both persistent environmental pollutants posing serious risks to the environment and human health. Law suits and environmental clean-up costs began to cut into Monsanto's bottom line, but more seriously there was a real fear that a serious lapse could potentially bankrupt the company.”
Hundreds of millions paid out for pollution lawsuits
Such a fear was not misplaced. By the 1980s Monsanto was being hit by a series of lawsuits. It was one of the companies named in 1987 in an $180 million settlement for Vietnam War veterans exposed to Agent Orange. In 1991 Monsanto was fined $1.2 million for trying to conceal the discharge of contaminated waste water. In 1995 Monsanto was ordered to pay $41.1 million to a waste management company in Texas due to concerns over hazardous waste dumping. That same year Monsanto was ranked fifth among U.S. corporations in EPA’s Toxic Release Inventory, having discharged 37 million pounds of toxic chemicals into the air, land, water and underground. In 1997 The Seattle Times reported that Monsanto sold 6,000 tons of contaminated waste to Idaho fertilizer companies, which contained the carcinogenic heavy metal cadmium.
Then in 2002 the Washington Post ran an article entitled, “Monsanto Hid Decades Of Pollution, PCBs Drenched Ala. Town, But No One Was Ever Told”. Monsanto began production of polychlorinated biphenyls in the United States in 1929. PCBs were considered an industrial wonder chemical – an oil that would not burn, was impervious to degradation and had almost limitless applications. Today PCBs are considered one of the gravest chemical threats on the planet.
Produced deadly PCBs for over 50 years
Monsanto produced PCBs for over 50 years and they are now virtually omnipresent in the blood and tissues of humans and wildlife around the globe. These days PCBs are banned from production and some experts say there should be no acceptable level of PCBs allowed in the environment. The U.S. Environmental Protection Agency says, “PCB has been demonstrated to cause cancer, as well as a variety of other adverse health effects on the immune system, reproductive system, nervous system and endocrine system.” But the evidence of widespread contamination from PCBs and related chemicals has been accumulating from 1965 onwards and internal company papers show that Monsanto knew about the PCB dangers from early on. For instance, toxicity tests on the effects of two PCBs in 1953 showed that more than 50% of the rats subjected to them died, and all of them showed damage.
With experts at the company in no doubt that Monsanto's PCBs were responsible for contamination, in 1968 the company set up a committee to assess its options. In a paper distributed to only 12 people but which surfaced at the trial in 2002, Monsanto admitted “that the evidence proving the persistence of these compounds and their universal presence as residues in the environment is beyond question ... the public and legal pressures to eliminate them to prevent global contamination are inevitable”. Monsanto papers seen by The Guardian newspaper reveal near panic. “The subject is snowballing. Where do we go from here? The alternatives: go out of business sell the hell out of them as long as we can and do nothing else try to stay in business have alternative products”, wrote the recipient of one paper. In 1969 the company wrote a confidential Pollution Abatement Plan which admitted that “the problem involves the entire United States, Canada and sections of Europe, especially the UK and Sweden”.
The problem was particularly severe in the town of Anniston in Alabama where discharges from the local Monsanto plant meant residents developed PCB levels hundreds or thousands of times the average. As The Washington Post reported, “for nearly 40 years, while producing the now-banned industrial coolants known as PCBs at a local factory, Monsanto Co. routinely discharged toxic waste into a west Anniston creek and dumped millions of pounds of PCBs into oozing open-pit landfills. And thousands of pages of Monsanto documents – many emblazoned with warnings such as 'CONFIDENTIAL: Read and Destroy' – show that for decades, the corporate giant concealed what it did and what it knew.”
Covering up the truth
Ken Cook of the Environmental Working Group says that based on the Monsanto documents made public, the company “knew the truth from the very beginning. They lied about it. They hid the truth from their neighbors.” One Monsanto memo explains their justification: “We can't afford to lose one dollar of business.” Eventually the company was found guilty of conduct “so outrageous in character and extreme in degree as to go beyond all possible bounds of decency so as to be regarded as atrocious and utterly intolerable in civilized society”.
But by the time that the Anniston pollution case came to court, Monsanto had already managed to hive off the old core of its business into a new company called Solutia. Although Monsanto and Solutia eventually agreed to pay $600 million to settle claims brought by more than 20,000 Anniston residents, Monsanto had by then relaunched itself as an agricultural biotechnology company.
Solutia was spun off from Monsanto as a way for Monsanto to divest itself of billions of dollars in environmental cleanup costs and other liabilities for its past actions – liabilities that eventually forced Solutia to seek Chapter 11 bankruptcy. According to a spokesman for Solutia, “(Monsanto) sort of cherry-picked what they wanted and threw in all kinds of cats and dogs as part of a going-away present,” including $1 billion in debt and environmental and litigation costs. Some pre-bankruptcy Solutia equity holders allege Solutia was set up fraudulently as it was always doomed to fail under the financial weight of Monsanto's liabilities.
Distancing itself from its legacy
The key to Monsanto's metamorphosis into a biotechnology company was the run away success of the herbicide Roundup. Within a few years of its 1976 launch, Roundup was being marketed in 115 countries. According to Glover, “Sales grew by 20 per cent in 1981 and as the company increased production it was soon Monsanto's most profitable product (Monsanto 1981, 1983)... It soon became the single most important product of Monsanto's agriculture division, which contributed about 20 per cent of sales and around 45 per cent of operating income to the company's balance sheet each year during the late 1980s and early 1990s. Today, glyphosate remains the world's biggest herbicide by volume of sales.”
By 1990 with the help of Roundup, the agriculture division of Monsanto was significantly outperforming Monsanto's chemicals division in terms of operating income, and the gap was increasing. But as Glover notes, while “such a blockbuster product uncorks a fountain of revenue”, it “also creates an uncomfortable dependency on the commercial fortunes of a single brand. Monsanto's management knew that the last of the patents protecting Roundup in the United States, its biggest market, would expire in the year 2000, opening the field to potential competitors. The company urgently needed a strategy to negotiate this hurdle and prolong the useful life of its 'cash cow'.”
Biotechnology was increasingly seen not just as a valuable complement to Monsanto's chemical technology but as a way of enabling it to further expand into agriculture and secure its “cash cow”. This lead to Monsanto selling off its plastics business to Bayer in 1996, and its phenylalanine facilities to Great Lakes Chemical Corporation (GLC) in 1999. Much of the rest of its chemicals division was spun off in late 1997 as Solutia, as already noted. This helped Monsanto distance itself to some extent not only from direct financial liability for the historical core of its business but also from its controversial production and contamination legacy.
Born-again GM Monsanto
By 2000 the current Monsanto had emerged from various transactions, including a merger for a time with Pharmacia, as a legally different corporation from the Monsanto that had existed from 1901-2000. This was depite the fact that both Monsantos shared not just the same name, but the same corporate headquarters near St. Louis, Missouri, and many of the same executives and other employees, not to mention much of the responsibility for liabilities arising out of its former activities.
As Monsanto had moved into biotechnology, its executives had the opportunity to create a new narrative for the company. They begun to portray genetic engineering as a ground-breaking technology that could contribute to feeding a hungry world. Monsanto executive Robb Fraley, who was head of the plant molecular biology research team, is also said to have hyped the potential of GM crops within the company, as a once-in-a-generation opportunity for Monsanto to dominate a whole new industry, invoking the monopoly success of Microsoft as a powerful analogy. But, according to Glover, the more down-to-earth pitch to fellow executives was that “genetic engineering offered the best prospect of preserving the commercial life of Monsanto's most important product, Roundup in the face of the challenges Monsanto would face once the patent expired.”
“Roundup Ready” GM seeds
Monsanto eventually achieved this by introducing into crop plants genes that give resistance to glyphosate (the active ingredient in Roundup). This meant farmers could spray Roundup onto their fields as a weedkiller even during the growing season without harming the crop. This allowed Monsanto to “significantly expand the market for Roundup and, more importantly, help Monsanto to negotiate the expiry of its glyphosate patents, on which such a large slice of the company's income depended.” With glyphosate-tolerant GM crops, Monsanto was able to preserve its dominant share of the glyphosate market through a marketing strategy that would couple proprietary “Roundup Ready” seeds with continued sales of Roundup.
Although the first of Monsanto's biotech products to make it to market was not a GM crop but Monsanto's controversial GM cattle drug, bovine growth hormone – called rBGH or rBST, Monsanto's corporate strategy led them for the first time to acquire seed companies. During the 1990s Monsanto spent $10 billion globally buying up seed companies – a push that continues to this day. It has purchased, for example, Holden's Foundations Seeds, Seminis – the largest seed company not producing corn or soybeans in the world, the Dutch seed company De Ruiter Seeds, and the big cotton seed firm Delta and Pine. As a result, Monsanto is now the world's largest seed company, accounting for almost a quarter of the global proprietary seed market.
Monsanto's biotech seeds and traits (including those licensed to other companies) accounted for almost 90% of the total world area devoted to GM seeds by 2007. Today, over 80% of the worldwide area devoted to GM crops carries at least one genetic trait for herbicide tolerance. Herbicides account for about one-third of the global pesticide market. Monsanto's glyphosate-resistant (Roundup Ready) seeds have reigned supreme on the biotech scene for over a decade – creating a near-monopoly for the company's Roundup herbicide – which is now off patent. Roundup is the world's biggest selling pesticide and it has helped make Monsanto the world's fifth largest agrochemical company.
Virtual monoploly drives up prices
This concentration of corporate power drives up costs for farmers and consumers. Retail prices for Roundup have increased from just $32 per gallon in December 2006 to $45 per gallon a year later, to $75 per gallon by June 2008 – a 134% price hike in less than two years. Because gene technologies can be patented, they also concentrate corporate power – by 2000 five pesticide companies, including Monsanto, controlled over 70% of all patents on agricultural biotechnology. And this concentration again drives up costs. According to Keith Mudd of the U.S.-based Organization for Competitive Markets (OCM), “The lack of competition and innovation in the marketplace has reduced farmers’ choices and enabled Monsanto to raise prices unencumbered.”
At a July 2008 meeting, Monsanto officials announced plans to raise the average price of some of the company's GM maize (corn) varieties a whopping 35 percent, by $95-100 per bag, to top $300 per bag. Fred Stokes of OCM describes the implications for farmers: “A $100 price increase is a tremendous drain on rural America. Let's say a farmer in Iowa who farms 1,000 acres plants one of these expensive corn varieties next year. The gross increased cost is more than $40,000. Yet there's no scientific basis to justify this price hike. How can we let companies get away with this?” What holds good for maize, also holds good for other GM crops. The average price for soybean seed, the largest GM crop in the US, has risen by more than 50% in just two years from 2006 to 2008 – from $32.30 to $49.23 per planted acre.
Patenting also inhibits public sector research and further undermines the rights of farmers to save and exchange seeds. Monsanto devotes an annual budget of 10 million dollars to harassing, intimidating, suing – and in some cases bankrupting – American farmers over alleged improper use of its patented seeds.
Recent price hikes have taken place in the context of a global food crisis marked by rapid food price inflation, which has exacerbated extreme poverty and hunger, and increased social tensions. The World Bank attributes 75% of this global food price inflation to “biofuels”, and Monsanto has been at the very heart of the “biofuels” lobby, particularly the lobby for corn ethanol. Monsanto has been accused of both contributing to and benefiting from the food crisis, while simultaneously using it as a PR platform from which to promote GM crops as the solution to the crisis.
In 2008 the President of the General Assembly of the United Nations condemned corporate profiteering: “The essential purpose of food, which is to nourish people, has been subordinated to the economic aims of a handful of multinational corporations that monopolize all aspects of food production, from seeds to major distribution chains, and they have been the prime beneficiaries of the world crisis. A look at the figures for 2007, when the world food crisis began, shows that corporations such as Monsanto and Cargill, which control the cereals market, saw their profits increase by 45 and 60 per cent, respectively.”