Rhetoric has been on the rise. Discussions, protests, and reports about agricultural biotechnology have become a stream of news stories. Headlines have trumpeted nutritionally enhanced "golden rice," advertised to meet health needs in developing countries. Demonstrations by environmental and other activist groups have surfaced at all the international trade and scientific meetings. Scientific organizations have stepped up to voice their opinions. Governments worldwide have increased their scrutiny. And industry has begun a concerted information campaign.

While this sums up the past 12 months in a nutshell, the bottom line is that issues related to agbiotech are largely unresolved, resulting in lingering uncertainty for the technology and the industry. Last year, around fall harvest, several significant issues were heating up--not the least among these were consumer reactions in Europe, Japan, and the U.S.; international trade and export questions; reports of environmental and human health concerns; wavering farmer acceptance of transgenic crops; and inconsistent regulatory process and product labeling laws ( C&EN, Nov. 1, 1999, page 11 ).

Consumers in Europe, and increasingly in Japan, still are strongly opposed to genetically modified crops and food. Whether U.S. consumers, generally found to be more favorable or less concerned about biotechnology, develop negative attitudes has been considered pivotal for the technology's continued acceptance. However, the recent recall of tortilla shells found to contain biotech corn not approved for food use may shake their confidence ( C&EN, Sept. 25, page 13 ). U.S. farmers quickly adopted the technology and now plant more than 70% of the biotech crops grown globally, followed by Canada and Argentina.

Opinion polls by Ipsos-Reid of Paris, and by Wirthlin Group of Washington , D.C., yielded conflicting results this spring. Although both found that awareness, but not necessarily knowledge, levels have risen in the U.S., Wirthlin reports 59% in favor of the technology, down from 78% in February 1999, and most willing to buy biotech foods. Ipsos-Reid reports 51% opposed to modified foods, up from 45% in 1998. But both found a growing desire among consumers to learn more, although there's no consensus on how that affects opinion.

Activists and industry have been trying to shape consumer, farmer, and decisionmaker views by launching major campaigns and increasing their information output. The industry-backed Council for Biotechnology Information is six months into a $50 million program. Activists have been pushing not only on the international front, but all the way down to state and local levels for food labeling and moratoria on planting.

Campaigns against food companies have accelerated. If they've influenced companies at all, it would be largely in Europe where almost all decisions not to use modified food ingredients have been made. In the U.S., baby-food producers, McDonald's , and Frito-Lay are the biggest producers to go biotech-free. Most companies, however, say they made the decision on their own to protect their markets and respond to consumer, rather than health or safety, concerns.

On the scientific front, questions about health and environmental impacts of biotech crops and food remain, with more data being added daily to the debate. But overall, scientists emerged this year often as supporters and less frequently as critics. The most notable was a cautiously supportive report from the National Research Council , and positive statements from several professional societies, as well as seven academies of sciences from around the world.

Numerous international trade and other groups have been discussing agbiotech and its implications, but few, if any, produced specific policies. Signed in January and still two to three years away from enactment, the biosafety protocol will allow the unilateral rejection of biotech crops and require the labeling of imports. Food labeling laws have been enacted in Europe, Japan, South Korea, Australia, and New Zealand, while bills have been introduced in the U.S.

Regulatory policies worldwide, still lacking any unified structure, continue to come under attack. In the U.S., the Food & Drug Administration , Environmental Protection Agency , and U.S. Department of Agriculture are seeing increased scrutiny of their processes. Meanwhile, EPA and FDA have produced new guidelines for biotech crop planting, voluntary food labeling, and required consultations on new products. Even Europe, which has had a de facto moratorium on product approvals for two years, voted down more strict measures and now is proposing a means to restart, even accelerate, the approval process and "regain public trust."

In all venues, there has been an undeniable call for science-based discussion, review, and regulation of agbiotech. Many believe that this will lead to increased consumer confidence. And there's a sense of anticipation as this year's harvest approaches and societal, governmental, and market forces once again play out. Predictions in late 1999 and early 2000--by USDA, Worldwatch Institute , and the American Corn Growers Association (ACGA) , but not industry--were that biotech acreage would be down by about 10 to 25% this year.

Crop Statistics

Although worldwide estimates are not yet available, USDA surveys published in June show that engineered soybeans, all herbicide tolerant, accounted for 54% of 2000 U.S. soybean acreage, up from 47% in 1999. Cotton, a mix of insect-resistant and herbicide-tolerant varieties, was planted on 61% of U.S. acres, up from 48% in 1999. Only modified corn, mostly insect-resistant, decreased, down to 25% of U.S. corn acreage compared with 37% in 1999.

"Our sales this past year for [insect-resistant] corn were flat to only slightly down from what they were in 1999," says Richard L. McConnell, president and chief operating officer of Pioneer Hi-Bred , the world's largest seed producer and a wholly owned DuPont subsidiary since October 1999. The decrease also has been attributed to lower infestations of the target insect for the past three years. "That's a very good outcome and a good sign that farmers recognize there's value there," he notes.

Pioneer's sales of Roundup herbicide-tolerant soybeans also rose in 2000. "Our increases are significantly greater than the USDA numbers," for both corn and soybeans, McConnell says. The difference may be due to more conservative agency estimates, he and others suggest, or shifts in market share. However, Monsanto has estimated a 5% rise in worldwide plantings of its biotech crops and Novartis reports that it is "holding its own," if not increasing its market share. However, on a dollar basis, industry sales are down.

Even though plantings are up, questions about what will happen with exports to Europe and Japan and what position grain handlers will take are arising again this fall as farmers harvest their crops. McConnell says Pioneer talks to grain handlers "constantly" and "so far hasn't seen any big issues with regard to their acceptance of genetically modified crops and doesn't really see any major changes in this year from a year ago."

Others in industry echo the expectation of few problems. Programs set up last year to channel crops into appropriate markets worked "fairly smoothly and successfully," they say. Surveys of grain handlers reported by USDA and industry have found this year that 80 to 90% plan to purchase biotech crops, but only 10 to 25% will segregate crops, and only about 10% might pay premiums for nonbiotech crops.

"In the eastern Corn Belt, a large portion of farmers' output goes into commercial and export markets where their customers are most sensitive to the genetically modified organism (GMO) issue," says Sano M. Shimoda, president of BioScience Securities , Orinda, Calif., an investment banking firm. "If you go to the western Corn Belt, most of it is on-farm fed or goes into the domestic feed system, and they are less concerned" about marketing issues.

"So, if insect-resistant corn was effective on an agronomic level, it's a question of economics and of farmers knowing where their product is going" he says. "It has nothing to do with the science. This is a question of marketplace perception and competitive issues."

A survey of 500 farmers commissioned by ACGA found that a majority still continue to be concerned about the responsibility for testing and segregating crops, potential liability for contaminated crops or grain shipments, and what they see as unreliable markets. In a dismal ag economy, with record yields and low prices, farmers with biotech crops also have feared that their crop would sell at a discount or that nonmodified crops would garner premiums. Neither circumstance has materialized in any major way, analysts say.

"What the marketplace has said is that there are not going to be discounts, but there will be small premiums in some markets for conventional crops, but these have been few in number and limited," Shimoda explains about the 1999 harvest.

Hitting bottom

According to USDA's Economic Research Service , market demand for nonbiotech corn was only 1% of 1999 U.S. corn production while demand for nonbiotech soybeans was about 2%. In both cases, demand came largely from food markets in Europe and Japan, and some domestic seed use. USDA reports grain traders have said that European consumers appear generally unwilling to pay premiums for nonbiotech commodities.

USDA and others, such as the National Corn Growers Association , caution that the market is very fluid and still could easily shift and require increased and more expensive crop identification and segregation. If burdensome logistical issues or meaningful price discounts were to arise this fall, then farmers would reconsider using biotech crops next spring, say analysts at the investment banking firm, J. P. Morgan Securities , New York City.

"I think U.S. industry feels that GMO concerns have bottomed," Shimoda says. "Clearly, there have been more positive comments globally about the value of this technology. So on one level, there has been a more positive tone to the market. But there still are some very difficult issues that have to be resolved before this thing bottoms. There will probably be some more ripples, since the psychology on genetically modified crops probably has a way to go on the downside."

The marketplace "could bottom in 2001, maybe at the latest in 2002, as the world sets up rules," in legal and regulatory areas, Shimoda concludes. Among these rules are mandatory labeling policies that will be coming into effect outside the U.S. in the next year or so, setting threshold levels for GMO content and tolerances on GMO contamination. Depending on how these shake out, the situation may be more or less workable for those involved.

"My view is: Let's get the issues settled, so at least the commercial system knows what the rules of the game are and then can deal with them," Shimoda says. "And if that means that XYZ country is impossible, then it's impossible, but at least it creates some certainty." Ultimately, he envisions global markets becoming segmented based on their positions toward the technology.

The U.S. and most of South and Central America--even Brazil, which has delayed approval of Monsanto's soybeans since 1998--will bow to pressure from farmers, and a number of key Pacific Rim countries will be in favor of GMOs, Shimoda believes. Japan, he says, will respond to consumer concerns, but eventually will be pragmatic. Other countries may choose to wait and, he adds, "at the end of the day, I think Europe is going to become isolated."

Other industry analysts paint similar pictures, anticipating upturns in agbiotech sales within a year or two and faster growth after that. Richard Leech, senior crop protection consultant at Wood MacKenzie , based in Edinburgh, Scotland, and part of Deutsche Bank, presents three scenarios. Starting from a market today of about $2.5 billion, a baseline scenario sees existing markets growing about 6% per year to just over $3 billion by 2003. A more pessimistic view, in which negative societal and political sentiments gain momentum, has the market falling to about $2 billion by 2003.

Wood MacKenzie is "confident at least about the baseline scenario and, more likely, that some new markets will develop," Leech says. The most optimistic view has the market growing an average 10% per year to nearly $3.5 billion in three years. "We believe that the key markets that will open up will be Brazil, sometime around 2001, and India, as well as China." Europe, of course, remains a large untapped market, with no further commercial development through 2003.

Industry reorganizes

In the short term, product approvals have inched ahead, with just a few approved this year. Sales growth, hurt by agrochemical markets, has been lackluster. Companies point to near-term products in their pipelines for future growth. With the dismissal in July of a lawsuit filed by Greenpeace International and others against EPA, many anticipate that the registration of new products and reregistration reviews of existing products will move ahead.

But whether or not the market for agbiotech products grows, the number of major producers has continued to decrease. In a year, the number has fallen from 10 to eight, and it is expected to quickly become seven. Analysts anticipate further consolidation to create the critical mass in resources to support R&D and marketing, and remain competitive. Although fewer in number, most firms have expanded seed or other operations to advance their biotech products.

ACGA and others in the farming and activist communities express concern over just a few companies controlling all the agbiotech products as well as a major portion of the annual $13 billion high-value seed market and 75% of the $28 billion agrochemicals market. Joint ventures with grain processors and food companies, or outright vertical integration, have given the companies even more reach in the agribusiness and food chains. Monsanto continues to be the leader in agbiotech product sales, but only temporarily in agribusiness overall. Assuming U.S. regulatory approval, Syngenta is expected to emerge in November from combined agribusinesses of Novartis and AstraZeneca . Syngenta will be the largest of the global agribusiness companies, with more than $8 billion in annual sales.

Very soon, however, Pharmacia , which acquired all of Monsanto in April, will sell about 14% of stock in the agribusiness operations that operate under the Monsanto name. Pharmacia will keep the former Monsanto drug business. Some analysts predict an eventual spin-off of the entire ag business, even though it is uncertain how the stock sale will be received by investors.

The stock offering will mark the end of Monsanto's stab at the life sciences strategy that sought links between ag, nutrition, and drugs. Pharmacia, like Novartis and AstraZeneca, wants to shed lesser performing and higher risk ag operations and be valued for its pharmaceutical business. Aventis also is expected to announce a new strategy for its agribusiness unit any day now. Soon after its formation in late 1999, Aventis began a strategic review and starting running its drug and crop science sides independently, admitting that it sees few synergies between them.

With the emergence of Syngenta and Monsanto, and possibly Aventis CropScience, as public companies, the stock market will, for the first time, have large, dedicated agribusiness companies to value on their own merits. However, some analysts still see a conflict in coming up with valuations that combine relatively mature agrochemicals and biotechnology.

"When you get Monsanto and Syngenta subject to the good old American investor that wants performance, and you throw the ag economy on top of that, there are going to be tremendous pressures on the industry," Shimoda says. "The marketplace is going to be extraordinarily competitive."

Just about two weeks ago, Monsanto saw its major U.S. patent on Roundup expire. At about $2.5 billion in annual sales, the flagship product brings in nearly 50% of the company's annual revenues. It's strategy has been to develop Roundup-tolerant crops, increase those seed sales, decrease herbicide prices, remain the low-cost producer, and create new proprietary formulations. It has been licensing the herbicide to the other major agrochemical producers. Monsanto is expected to face new pricing pressures but remain a major force.

Unlike Syngenta and Monsanto, other major competitors still combine agrochemicals, biotechnology, chemicals, and sometimes drugs. DuPont, which has drugs, and

Dow Chemical also recently upped the ante in agbiotech by acquiring Cargill's U.S. and Canadian hybrid seed business. This boost in seeds, giving it an estimated $350 million to $400 million in annual seed sales hen combined with its Mycogen business, clearly positions Dow to be a more significant competitor and supports its plans to market biotechnology products.

Aventis, Bayer , and BASF are primarily agrochemical producers but have competitive agbiotech product pipelines, PaineWebber analysts say. This year, BASF pledged to invest nearly $700 million on agbiotech over 10 years.

BASF doubled its crop protection business when it acquired the Cyanamid business from American Home Products for $3.8 billion in July. BASF works with more than 100 seed companies to get its genetic traits--developed by traditional breeding, not genetic engineering--into crop varieties, says Scott Gaddis, global marketing director for herbicide-tolerant crops at BASF.

Until it acquired Pioneer, DuPont had focused on output genetic traits, such as high-oil corn and high-oleic soybeans. The company has been creating an external advisory panel this year. The aim is to guide the company's actions, help it create positions on important issues, and guide and challenge it in the development, testing, and commercialization of products based on biotechnology. The panel will audit progress and produce a public report.

The eight agribusiness companies along with the American Seed Trade Association , and the Biotechnology Industry Organization (BIO) launched the Council for Biotechnology Information (CBI) in April. CBI's information program is targeting people in the U.S. and Canada. Having learned from Monsanto's failed U.K. advertising campaign, Ted McKinney, CBI's interim executive director, says the council's less aggressive program focuses on trust building and being a credible source on the benefits of biotechnology.

Critics are calling the effort, at best, a public relations campaign. "There are things that we learn we've got to do better and questions that we have to answer," McKinney says. "The degree to which we are listening as well as informing, and our long-term behavior, I hope will demonstrate and dispel the idea that it is a PR campaign."

Golden future?

Agbiotech producers believe that the outlook will improve when they can offer products with clear consumer benefits. But critical advocacy groups, such as U.K.-based GeneWatch and the Food Commission , call benefits to consumers "overstated" by industry as part of an image-boosting campaign. New products only raise new safety concerns, they note, and don't alleviate the old ones. ACGA adds that industry messages are "ignoring the fact that the GMO controversy is an economic issue to production agriculture, not a health and environmental issue."

But industry also emphasizes that crops with higher yields, improved nutrition, medical benefit, or that can be grown under difficult agronomic conditions with reduced environmental impact will help meet global agricultural and food needs. According to the United Nations , the world's population is expected to grow from 6 billion today to 8 billion by 2030, with most of that growth in developing nations. At the same time, available arable land is expected to come under extreme pressures from the need for increased food production. However, the crops that industry describes are still years away from production.

Changes in political, economic, cultural, and social factors offer solutions, biotech opponents believe. Another advocacy group, the Union of Concerned Scientists , cites an April interim report from the UN's Food & Agriculture Organization suggesting that there will be "enough food in the future--without genetically engineered crops," although "poverty and poor food distribution will continue to limit access to food."

However, seven academies of science from around the world stated with the July release of their report, " Transgenic Plants and World Agriculture ," that the key to moving forward is "responsible research, development, and implementation of genetic modification technology for widespread agricultural use." The group also pointed out the need for other technologies, economic development, improved food access and distribution, and identifying potential health and environmental risks.

Bruce Alberts, president of the U.S. National Academy of Sciences , noted that "the obvious concern is that the recent backlash against [genetic engineering] technology will completely overshadow all the promise that the technology offers."

Much of the interest has been spurred by the report that scientists have succeeded in engineering -carotene-enhanced, or golden, rice. Scientists from the Swiss Federal Institute of Technology in Zurich and the University of Freiburg in Germany published laboratory results in a January issue of Science [287, 303 (2000)]. The rice, as a staple food in many developing countries, is anticipated to meet the vitamin A needs of 134 million children worldwide, preventing up to 5 million deaths and 500,000 cases of vitamin A-deficiency-related blindness per year.

In April, Monsanto, in an unprecedented move, announced that it had a working draft of the rice genome and that it would make the information available to rice researchers worldwide. The work was conducted under contract primarily at the University of Washington, Seattle, by Leroy Hood, professor of molecular biotechnology. The International Rice Genome Sequencing Project had anticipated that a final draft wouldn't be completed until about 2007, at a cost of $200 million.

Although Monsanto's contribution should help accelerate the development of golden rice, a useful field crop is still a few years away. In May, AstraZeneca announced that it would make its related technology available and signed a collaboration with Greenovation , a German biotech firm, to help fund commercial development. Golden rice's inventors, Ingo Potrykus and Peter Beyer, had licensed their invention to Greenovation in an earlier deal. Potrykus and Beyer intend to distribute the rice technology free of charge to farmers in developing countries.

AstraZeneca will keep commercial rights for developed nations, such as the major rice markets in the U.S. and Japan. It will provide regulatory, advisory, and research assistance in developing countries. In August, Monsanto added its support, providing royalty-free licenses for technologies needed to develop golden rice. The inventors have expressed the hope that others will follow Monsanto's example--there are 70 related patents and more than 32 patent holders.

The Rural Advancement Foundation Inc. (RAFI) , a Canada-based activist group, quickly attacked the deal, calling it a mistake that "forces a global patent regime on the poor." RAFI suggests that by "sanctimoniously promising to make the technology freely available to poor farmers in developing countries, AstraZeneca captured years of public investment at minimal cost.

Potrykus' response to critics, published at http://agbioworld.org , states, among other things, that the rice will undergo safety, needs, environmental impact, and socioeconomic assessments before being released. He also disputes arguments about industry's role and concerns about biodiversity. "Of course, if you are against genetic engineering on principle you must fight golden rice because it shows the public that the technique is good for the consumer, the poor, the disadvantaged, and not just good for industry and the rich," he writes.

Societal pressures

The seven national academies and others are calling on industry to consider its role and keep Third World needs in mind in product development. "Private corporations and research institutions should make arrangements to share [genetic engineering] technology, now held under strict patents and licensing agreements, with responsible scientists for use for hunger alleviation and to enhance food security in developing countries," the report states.

"We endorse the report's recommendation for more collaboration between biotechnology companies and the public sector on R&D for biotechnology products for developing nations. But biotechnology companies cannot do it alone," says Val Giddings, vice president for food and agriculture at BIO. "Biotechnology companies have already made major donations of technological knowledge and inventions. Governments around the world will have to reverse their decades-long decline in funding."

Agbiotech producers such as Monsanto, Aventis, Novartis, and Pioneer say they have worked for many years with public research organizations in various countries to help develop new crops and train scientists. RAFI and other advocacy groups, including the BioDemocracy and Organic Consumers Association , have alleged that such efforts amount to biopiracy of indigenous plant genetics and knowledge and are used by industry to gain commercial footholds.

In July, Novartis presented its guidelines for collaboration and the transfer of intellectual property. It typically provides royalty-free licenses to genetic traits for specific crops in each country. It has, for example, made its Positech system--which avoids the use of antibiotic resistance markers--available to the International Rice Research Institute in the Philippines.

Industrial biotechnology efforts have been criticized for focusing on the needs and wants of farmers in industrialized nations. Work on crop staples of interest to the poor or to developing nations--such as rice or sweet potatoes--does not get corporate attention because there is no profit motive, say critics and even the seven science academies.

Although corporate R&D programs may not focus on certain crops, Novartis and others can readily offer examples that technology at least is being transferred to those who need it. "From a very pragmatic standpoint, there is some technology that a company just doesn't have a ready use for," one industry representative says. "So it's very easy to apply that to crops that are more appropriate in the developing world. Technology transfer is very practically doable in those cases.

"There also is an opportunity to strike a balance between commercial and altruistic interests," he continues, "and, where you can strike that balance, it would be remiss of companies not to do it."

McConnell says Pioneer works on at least two fronts. "If we help train scientists, that goes a long way in helping them generate new ideas and ways that they can approach the needs of their own constituency," he explains. "We're not just making this a philanthropic move, but are working with countries to develop business opportunities, and they are very receptive to that," he explains.

"It's not just a total technology handoff," he continues, but instead the effort seeks to help create required product development and marketing infrastructures. "We work with them to develop market opportunities for our business as well as developing businesses in those countries that range all the way from seed to grain handling to food processing and on down the chain. I believe they recognize that there are some big opportunities economically if they can work with us to best utilize this technology."

Shimoda agrees. "I think the industry is trying to put its best foot forward to demonstrate to a broad spectrum of the population the social value of this technology. I've always been a big believer that this technology has to create economic value. If it can create economic value, then companies will recognize their responsibility to provide this technology for social value.

"If it's put the other way--such that the world starts to perceive and expect that this technology should be free based on social goals--and I'm not minimizing the importance of social goals--then it won't happen," he continues. "Economic strength creates tremendous power to improve the social use of this technology, but it is going to be a function of intellectual property control. If they can protect their commercial rights, I think most companies will be tripping over themselves to find ways that they can share the wealth."

Industry readily admits intellectual property rights are critical in providing commercial incentives for their substantial investments of time and money in product development. Many opposed to patents on principle, especially those on plants or other living organisms, believe they threaten food security, sanction biopiracy of knowledge and resources, violate human rights, compromise health care, impede research, work against the welfare of animals, create further inequality among farmers, and prevent shifts to sustainable agriculture.

The international patent situation, especially for plants, is in a major state of flux ( C&EN, Sept. 11, page 19 ). A good example is Argentina, where a lack of enforceable patent rights contributed to Monsanto's not charging technology fees, about $7 per acre in the U.S., to soybean farmers. Already lower herbicide prices outside the U.S., where Roundup was already off patent, only further angered U.S. farmers who learned they were paying more from a February General Accounting Office report. The farmers have asked for refunds for their 2000 crops, elimination of the technology fees, and the right to save seeds for replanting.

The seven academies addressed patent issues as well, saying, "Intellectual property regimes should facilitate the maximum possible innovation in development of beneficial new crop varieties. To be effective, [international patent] conventions should be consistent with each other so as to reduce any distortions in the promotion of innovation by farmers, public research institutions, and for-profit corporations." More specifically, they recommended that there be bans on very broad patents and "special exemptions . . . to poor farmers to protect them from inappropriate restrictions in propagating their crops."

Such societal, government, scientific, economic, and market-related issues hopefully will move toward resolution in coming months and years. With so much attention being given to the future of agricultural biotechnology, CBI's McKinney admits, "overpromising is one of the biggest challenges we face."

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Monsanto leads in agribusiness sales
Company/business unit	Half-year 2000 sales ($ billion)	Change from 1999	Major events/comments
Monsanto	$3.29	5%	Acquired by Pharmacia in April.
DuPont Agriculture & Nutrition	3.19	nm	Includes seed sales by Pioneer Hi-Bred, acquired in October 1999. Pioneer, Ag & Nutrition operations now part of DuPont's Biosolutions Enterprise.
Novartis Agribusiness	2.97	2	To be combined with AstraZeneca's business to form Syngenta.
Aventis CropScience	1.99	-5	Created in December 1999 from Hoechst-Schering AgrEvo and Rhône-Poulenc businesses.
BASF Agricultural Products	1.70	nm	Includes Cyanamid agricultural products business acquired from American Home Products July 1. Does not have any biotechnology or seed sales.
Zeneca Agrochemicals	1.68	4	Unit of AstraZeneca. To be combined with Novartis business to form Syngenta.
Bayer Crop Protection	1.42	21	No biotechnology or seed sales.
Dow AgroSciences	1.29	-3	Includes urban pest control products, but not pending deal for Cargill seed business.
Note: Includes crop protection chemicals, biotechnology products, and seeds, but not animal health, nutrition, pest control, or consumer businesses unless noted. nm = not meaningful.

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