NOTE: Informative arrticle confirming the longstanding predictions of critics that GM would lead down a path of ever increasing complexity, risk and concentration.
EXTRACTS: Second-generation traits are much more genetically complex and correspondingly hard to discover.
'Drought tolerance is not like herbicide resistance where it was just a matter of finding and inserting a single trait. A single company, even a very large one, probably doesn't have the resources to deliver that type of attribute and bring it to market in a reasonable timescale of, say, five years. That is likely to be the rationale for this pooling of resources.'
The GM business looks like it's turning into a battle for giants only.
GM giants pair up to do battle
Monsanto and BASF join forces to create second-generation GM crops.
Monsanto is making a bid to dominate commercialized plant biotechÃs second decade. In March, it announced a $1.5 billion collaboration deal with BASF, of Ludwigshafen, Germany. The arrangement promises to be the anchor for much of Monsanto's ongoing R&D, including the introduction of complex second-generation traits to counter drought tolerance, an issue of global importance to agriculture.
Indeed, the BASF deal sets the scene for the next ten years of plant biotech, say crop industry analysts. The scale of the R&D cooperation poses a challenge to Monsanto's main rivals in the genetically modified (GM) crop business - DuPont's Pioneer Hi-Bred, in Des Moines, Iowa, and Basel-based Syngenta.
In the deal, each company is contributing $750 million (600 million) to an R&D program that over the next five years aims to discover and develop genetically modified crops that deliver higher yield while surviving environmental challenges, such as drought and heat. BASF's main contribution is its massive pool of genes and traits, together with the high-throughput phenotyping facility at its CropDesign business in Ghent, Belgium, and high-throughput metabolic profiling at the Metanomics subsidiary in Berlin. It claims to hold 1.5 million metabolic profiles for more than 35,000 genes in its genetic library.
St. Louis-based Monsanto's high card is its expertise in marketing GM seed products to farmers - something BASF has never done.
Some eight separate product lines will be created, in corn (maize), cotton, canola (oilseed rape) and soybean. The cost of commercializing those products is not included in the $1.5 billion number, as they will not reach the market until the next decade. If they do, though, sales revenues would be divided 60:40 between the partners, with the US company taking the lionÃs share. The project will not be spun out as a separate company, says BASF.
The project is a huge boost to both companies' investment in the technology. For example, BASF's spending on plant biotech outside the program will be 330 million from 2006-2008; its 600 million contribution to the Monsanto collaboration is in addition to that.
The new focus on yield and stress-tolerance traits moves the industry away from the first generation of GM crops that contained a single 'input trait', such as the gene for the Bacillus thuringiensis toxin for pest resistance. Second-generation traits are much more genetically complex and correspondingly hard to discover.
'Drought tolerance is not like herbicide resistance where it was just a matter of finding and inserting a single trait,' says economist Graham Brookes, of agricultural and food consultancy PG Economics in Frampton, UK. 'A single company, even a very large one, probably doesn't have the resources to deliver that type of attribute and bring it to market in a reasonable timescale of, say, five years. That is likely to be the rationale for this pooling of resources.'
Expensive though they may be to find, these traits are in increasing demand among farmers. Gautam Sirur of agribusiness consultancy Cropnosis in Edinburgh claims drought is 'the single biggest threat to crop yields worldwide.' He points to the near-disaster affecting Australia's farming sector, where output has fallen by up to 40% because of drought. Total US losses during a drought year could be $5-6 billion for just five or six major crops and that doesn't include the economic effect on livestock.
Counting just the key crops of maize, wheat, sorghum, soybean and cotton, Sirur puts the peak market value for these traits at $1.8 billion for the trait fee alone. The peak could even reach as high as $3.6 billion depending on factors like climate change - and that within a very short time from launch, he says. The leading candidate crop is maize, which combines high value with a high vulnerability to drought.
That was enough for BASF plant science director Peter Oakley, speaking at the launch of the Monsanto partnership, to describe yield and stress traits as 'the single most promising opportunity in agriculture over the next decade.'
That also could account for the recent rash of GM collaboration agreements. Cropnosis's Sirur regards the Monsanto-BASF deal as a strategic response to Wilmington, Delaware-based DuPont's increasing collaboration with Midland, Michigan-based Dow and Syngenta - in particular, the April 2006 Greenleaf Genetics joint venture between Pioneer and Syngenta.
The sums being spent by these agbiotech competitors now are quite large. Pioneer and Monsanto have both intensified their GM research since 2005. Monsanto has grown its seeds/biotech R&D spending at 14% a year, last year taking it from $632 million to $718 million, says Sirur. About a quarter of that, or $170 million, goes into research on drought-tolerance traits, he estimates. It's assumed DuPont-Pioneer is investing similar amounts, whereas Syngenta is investing around 15-20% of its total $300 million seeds & plant science budget on drought tolerance. In June, Monsanto also completed a $1.5 billion acquisition of Delta and Pine Land Company, a cotton seed company with genetics expertise based in Scott, Mississippi, but only after both companies agreed to sell assets to alleviate the U.S. Justice Department's concerns about lack of competition and higher prices.
This massive investment is happening because all GM companies believe the strong world demand for grain will continue as developing countries' populations grow and prosper. GM food is playing a significant role in meeting the demand: Plantings of GM crops are increasing at 10% to 20% a year despite the European ban, says Vivien Moses, professor and GM expert at London University's Queen Mary College.
Meanwhile, more land is being set aside for growing biofuels. The US alone will need 25 million acres of corn and 10 million acres of soybeans to supply its biofuels needs by 2010, says Monsanto.
William Niebur, DuPont's vice president for crop genetics R&D, calls these factors a 'global mega-trend' that will force farmers to 'rapidly adopt technologies that will increase their productivity.' DuPont's seed business, Pioneer Hi-Bred, has in the past year 'significantly increased' the number of products with yield-enhancing biotech traits, he says.
The downside of huge investments like these is that they will probably end any chance of increased diversity in the GM crop business, says PG Economics' Graham Brookes. 'The cost of second- and third-generation technology, together with the increasingly heavy regulation and the cost of testing, means there is less chance of seeing other companies enter the market,' he says.
The GM business looks like it's turning into a battle for giants only.