Monsanto Roundup Ready soybean crop
On Wednesday April 16th 2003, a new report by independent investment analysts Innovest Strategic Value Advisors is launched [1]. It gives the business strategy of the agrochemical giant Monsanto the lowest possible rating of a triple-C. The report comes days before Monsanto's Annual General Meeting on April 24.
Launched in New York at 8 a.m. local time on Wednesday April 16th, Innovest's report warned shareholders and possible investors of Monsanto's "above average risk exposure and less sophisticated management than peers", predicting that "it [Monsanto] will likely under-perform in the market over the mid to long-term".[2]
Frank Dixon, Managing Director at Innovest Strategic Value Advisors said,
"While last year's profit losses lead to a change in leadership at the company, it did not lead to a change in strategy. If Monsanto does not take steps to mitigate its substantial market risks, further investor losses are likely. Coupled with the risk of heavy financial losses due to genetic pollution or technology failure, the sustained market rejection of GE [Genetically Engineered] foods makes Monsanto a poor investment,"[3]
The report analysed risks and liabilities associated with Monsanto's Geneticially Modified (GM) crop business. Referring to the example of StarLink corn contamination scandal in 2000, in which the company Aventis lost $1 billion, Innovest estimated Monsanto's potential financial fallout from a "StarLink Scenario" to be $3.83 liability per share.
The report also looked at trends in key markets for Monsanto, noting the lack of regulatory approval and stiff consumer opposition that continue to block the company's GM crops. Seven years after the introduction of Monsanto's first commercial GM crop, the vast majority of GM crops are still grown in just three countries: USA, Canada and Argentina. Even in the US upwards of 90% of consumers now demand GM food to be labelled and a third would reject GM food if given the choice.
Frank Dixon, Managing Director at Innovest Strategic Value Advisors added,
"GE products is one of the most widely rejected product groups ever. Many have been removed from the market or developed but not commercialised due to market rejection,"
"Major food importers such as China, Japan and Korea have recently followed the restrictive European approach, and more than 35 countries have enacted or announced laws that restrict GE imports and/or require labelling of foods containing GE ingredients. This market rejection is steadily moving upward in the food supply chain from consumers to retailers to producers to farmers".
That situation looks bleak even as Monsanto continues to prosecute lawsuits against farmers in a number of countries, an action that does not exactly increase trust among its own potential clients. In addition farmers are now suing the company for financial losses incurred by contamination of their fields from neighbouring GM canola fields. Next in the Monsanto pipeline is GM wheat, which is being boycotted in key markets by farmers and food industry even before its approval. By all indicators, GM bread and GM pasta are threatening to be a commercial disaster.
Charlie Kronick, UK Greenpeace GM campaigner said,
"In spite of being bought, re-floated, re-branded and re-invented, Monsanto hasn't really changed: it's a hugely unprofitable chemical company feigning interest in the environment, while in fact betting the farm on future profits and control of the global seed and food market".
"Monsanto didn't fool anyone five years ago when it claimed it just wanted to feed the world with GM crops, and they're not fooling anyone now. Any kind of investor - smart, ethical and hopefully both - will drop them like a hot potato"
Editors Notes
[1] Innovest Strategic Value Advisors is an internationally recognised investment research and advisory firm specialising in analysing companies' performance on environmental, social, and strategic governance issues, with a particular focus on their impact on competitiveness, profitability, and share price performance.
Founded in 1995 with the mission of identifying non-traditional sources of risk and value potential for investors, the firm currently has over US $1 billion under direct sub-advisory mandates with partners including ABN-AMRO, Mellon Capital, Brown Brothers Harriman, T. Rowe Price, and Credit Lyonnais. Innovest also provides custom portfolio analysis and research to leading fund managers including Schroders, State Street Global Advisors, and Rockefeller & Co. Innovest's institutional clients include two of the largest pension funds in the world - CalPERS (USA) and ABP (Netherlands). In addition, the firm provides research and strategic advice to senior executives of Global Fortune 500 industrial companies.
For more information about Innovest see visit their website at http://www.innovestgroup.com
[2] Monsanto suffered $ 1.7 billion in losses last year and has failed to open new markets for its controversial genetic modified products. Yet, Monsanto continues to pursue its failing business strategy of betting on a speedy acceptance of GM foods.
[3] Monsanto accounted, directly or indirectly, for 91% of all GM plants grown in 2002, a majority of them engineered to withstand spraying with the company's weed killer Round-up (glyphosate). After loss of patent in 2000, Round-up is under increasing pressure from competition, and at the same time resistance to Round-up is found to be developing in many of the weeds it is meant to control.
