A New Monsanto Growth Initiative Sprouts Up

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Thanks to the Environmental Protection Agency, you can now eat more of Monsanto's (NYSE: MON  ) herbicide Roundup in your food.

Because there wasn't anywhere near as much coverage as there was for President Obama signing into law the so-called "Monsanto Protection Act" -- which prohibits federal courts from halting the sale of genetically modified or engineered seeds -- the decision by the regulatory agency to increase the acceptable level of pesticides permitted on food crops went through without much of a fight (though the EPA received nearly 11,000 public comments opposing the move).

What it means is that Roundup will become an even larger profit center for the chemicals giant. Monsanto's agricultural productivity segment generated $1.2 billion last quarter, driven primarily by sales of its glysophate-based herbicide Roundup to farmers and a smaller portion to consumers, which is handled by Scotts Miracle-Gro. Sales have risen 24% over the first nine months of the fiscal year, only a small portion of which is because of higher prices.

Roundup remains the largest crop protection brand globally, and because it genetically modifies seeds to survive an application of the herbicide, Monsanto has oriented the focus of its crop protection business to support Roundup Ready crops sold to farmers. Buy seeds that can withstand Roundup, sell more Roundup to spray on crops.

A byproduct of this symbiotic relationship, though, is the creation of superweeds, weeds that have developed a tolerance to the herbicide and are spreading across farmland, impervious to man and machine. Because farmers who grow GM crops typically use 25% more herbicide, not less, than those who grow traditional seeds, the weeds are developing a thirst for it.

Yet it's not just weeds that are growing resistant. Bugs, too, have become immune to the chemicals. Monsanto's GM corn, for example, was molecularly modified to kill pests like rootworm, but they're making a comeback even as GM corn accounts for 86% of the country's supply. Now we've got superinsects, too!

Just as Monsanto is enjoying a surge in sales of Roundup, pesticide makers are witnessing greater sales of pesticides to combat these superbugs. Revenues at Sygenta (NYSE: SYT  ) rose 1.5% to $4.2 billion, FMC's (NYSE: FMC  ) sales were 5% higher, and American Vanguard's (NYSE: AVD  ) surged 39% last quarter. The three companies account for three-quarters of all ground pesticides sold in the United States.

The greater use of pesticides may also be harming the honeybee population, as a nexus is being formed between colony collapse disorder and the role of neonicotinoids made by Syngenta, Bayer, and Dow Chemical (NYSE: DOW  ) play.

So having the EPA coming in and allowing our fruits and vegetables to contain even greater amounts of Roundup on them is a big cause for concern. The proposed rules would permit crops such as sesame, flax, and soybean to have twice as much glysophate levels than previously permitted, while sweet potatoes and carrots would see them climb by 15 times and 25 times the previously allowed levels, respectively.

While Monsanto, of course, says ingesting such amounts of its herbicides is safe, an MIT study published earlier this year found it causes "insidious" damage at the cellular level and leads to increased risk of gastrointestinal disorders, heart disease, autism, cancer, and Alzheimer's disease.

Having to combat superweeds and superbugs requires a lot of herbicides and pesticides. After passage of the Monsanto Protection Act, perhaps this ought to be called the Monsanto Growth Rule. The Roundup segment of the chemical giant's business generates 30% of its revenues and 26% of its operating profits. When these regulations going into effect, we just might see more profits sprouting from there, like a genetically modified plant amid a Roundup-sprayed field.

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Read/Post Comments (16) | Recommend This Article (20)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On July 27, 2013, at 7:39 PM, 18RC wrote:

    This is National Public Radio caliber article with all the sensationalized scare talk about "superweeds", "superbugs" and "collapsing honeybees" and of Roundup causing "heart disease, autism, cancer, and Alzheimer's disease". Evidently Motley Fool management and article writers are targeting the high school educated blue collar investor demographic.

  • Report this Comment On July 27, 2013, at 8:56 PM, PoliticoJunky wrote:

    Seriously 18RC, you think that this is only of concern to the "high school educated blue collar investor demographic?" That is seriously funny. Putting chemicals in our food is not only wrong but is extremely hazardous to our health. Monsanto should be banned from our tables and more people should be trying to push back at them. This has gotten out of hand with their lobbyists paying off Congress and our President. Why are we protection these people? I am a college graduate and in law school and I agree with this article. You should wake up and stop drinking the pesticides.

  • Report this Comment On July 27, 2013, at 9:18 PM, horratio wrote:

    A hatched chick grown to a salable bird in 5 weeks, which if not harvested, continues to grow to point, that it can longer effectively breathe and dies of pneumonia.

    Chemical transmitters between human cells, naturally control contact inhibition, regulating tissue anatomy. Interferrance with this mechanism results in unregulated cell growth, commonly referred to as "cancer".These macromolecules that affect this are measured in parts per million or billion.Cross reactions from some other chemicals do same. THE POINT:There are likely unintended & unknown consequences to the chemicals intentionally placed in food supply.

  • Report this Comment On July 27, 2013, at 9:22 PM, cnumb516 wrote:

    No way, no how Monsanto ever hears the word "no" from the EPA, Congress or even the Big Guy. There are more than 30 of Monsanto's directors, CEOs, VPs, board members, managers, scientists, attorneys and consultants that hold Federal Positions within the US government.

    Someone (( I know what you thinking, who is that someone?... I just don't know when MON is holding all the cards)) should make our GOVT aware that EUROPE wants nothing to do with Monsanto and is kicking them out with their seeds.

    WHY DO YOU THAT IS ?????

  • Report this Comment On July 27, 2013, at 11:18 PM, JuneSmith wrote:

    I totally support the message in this article. We are poisoning ourselves and our children. Many of my friends and their children suffer from health problems which have been kept at bay by eating organic meals only. Unfortunately, eating healthy food requires more effort. Which one of us is willing to cook a meal after a long day on the job? And clean-up? Forget it! Food Inc. has it ready for us on the grocery store shelves and at drive throughs.

    What should we as consumers do? We should be willing to pay a little more for organic meat, vegetables and fruit. If our budgets are tight (and even if they are not), we should buy organic and forgo expensive empty calories delivered in frappuccinos, sodas and chips. And the entire family should actively participate in preparation/clean-up. Yes, it is hard, but we should do it in our "victory kitchens."

  • Report this Comment On July 28, 2013, at 2:28 AM, getthetruth2 wrote:

    Half the roundup in the US comes from China I guess that doesn't fit into your anti_monsanto rampage that is more suited to a crazies blog that a serious financial blog

  • Report this Comment On July 28, 2013, at 2:32 AM, getthetruth2 wrote:

    You are clearly more supporting organic in your previous blog what do you own or sell to others? Is it based on logic or screwball crazinomics. Monsanto stock is up from $8 about 10 years ago to $102 now. It would be bad to bet against Monsanto and 10 years ago when you were in high school there were even more crazy anti-monsanto bloggers out there

  • Report this Comment On July 28, 2013, at 2:33 AM, getthetruth2 wrote:

    How goes that WholeFoods company who's organic cheese killed someone the other day? I guess that doesn't count as worthy

  • Report this Comment On July 28, 2013, at 4:42 AM, fishingurl wrote:

    Yum! nothing smells better than a fresh-brewed cup of roundup in the morning!

    Thanks for this article. I have been watching the colony collapse issue for many years now, and find it alarming. Fortunately, Monsanto is not welcome in Europe. Unfortunately, our government was for sale the minute it was formed, and we have a real uphill battle trying to fix 250 years of corporacracy in this country.

    The good news was a little-hailed article that talked about the city of Detroit as the new birthplace of bee colonies, because the degradation of the urban/suburban landscape has allowed takeover by a wide variety of plant species, unaided by pesticides, and the bee populations there are rebounding. So there is hope.

  • Report this Comment On July 28, 2013, at 9:49 AM, thomasbihn wrote:

    18RC, It was more than just speculation with the link between Glyphosate and Parkinson's disease.

    Regarding investments, I would say that MON is a good investment over the next several years because they have so much influence in Washington that it will take a long time to steer the ship in a different direction. By that time, it is conceivable that MON will adjust to the changing tide and continue to be competitive and profitable.

    Meanwhile, investment in organics is also a growth industry because of increasing public awareness.

    getthetruth2, While your statement that there was food-borne illness in one of WFM's products is true, it is also true that there are as many, if not more cases in non-organic supplies, which nullifies the argument. The fact of the matter is that illness based on chronic consumption of chemicals such as glyphosate is being linked to wide-spread serious uncurable illness. I'll take puking and/or diarrhea for a few days to a week over death from Parkinson's disease thank you very much.

    As a side, it should also be noted that there is little spraying of glyphosate on non "cash crops", so the imperative to eat organic for items such as cucumbers, broccoli, and tomatoes is not nearly as high as for items made with soybean, canola, cotton, and corn. You get many more phytonutrients by buying from a local farmer because these veggies lose their nutrients rapidly after being picked. Even if it is sprayed with pesticide, it is still healthier to buy locally than to buy a major retail chain.

    You should always thoroughly clean your fruits and vegetables, no matter the source (or the claims of already being washed).

  • Report this Comment On July 28, 2013, at 11:52 AM, greybuscat wrote:

    I'm all for being circumspect about what we put into our food, water supplies, and soil, but a lot of people seem to object to Monsanto PURELY on the grounds of genetic modification, which is an asinine appeal to nature, at best.

    If something is poisonous or harmful, GREAT! Bring back evidence of it, and I'll grab my pitchfork.

    Otherwise, it's all a bunch of fear-mongering and pseudo-scientific nonsense.

  • Report this Comment On July 28, 2013, at 12:01 PM, jonnyappleseeds wrote:

    I know this much, if the Monsanto stuff causes harm to me or my family there will be no place for them to hide from me or the rest of humanity, so take very very care Monsanto is the money worth what you will get for such actions?

  • Report this Comment On July 28, 2013, at 1:34 PM, frankbeisel wrote:

    people wear ignorance like armor when they think knowledge may cost them a little money. If you think a little poison is good for you then there is no cause for alarm. If you don't want chronic gastro-intestinal inflammation which may or may not be a pre-curser to cancer try organic vegetables and don't eat corporate grown food. nothing in this article says Monsanto is a bad investment, just that there may be unintended consequences from adding chemicals to the food supply. Notice the name calling is coming from the less articulate members. Frank Beisel

  • Report this Comment On July 28, 2013, at 8:36 PM, SanPasqual wrote:

    Glyphosate is an organic chemical, so heavy use of RoundUp should be classified as intensive organic farming.

  • Report this Comment On July 29, 2013, at 9:23 AM, OtisxOtis wrote:

    So if they use more pesticides on their plants, I assume there'll be more bees dying from all of it. Which would probably be the government's plan to begin with since the majority of our earth needs bees to pollinate almost all our greenery. We're slowly getting screwed and screwed every day.

  • Report this Comment On July 29, 2013, at 11:47 PM, groggy920 wrote:

    Some things that were left out of this article:

    The petition that was referenced in this article in which the EPA raised crop residue tolerances for glyphosate is actually an interesting read for those who want actual facts. It lists all of the tests that were conducted to establish the risk tolerances. Most were long term feeding studies on lab animals. In these tests, a LOAEL (Lowest-observed-adverse-effect-level or in plain English, the rate at which bad things happened to lab rats) was established at 20,000 parts-per-million (ppm). The Roundup/glyphosate residue levels that were set by the EPA ranged between .01 ppm and 100 ppm on the high side for animal forage. Most human edible crops were between 0.01 ppm and 5 ppm. So a safety factor of greater than 200x, meaning the residue levels on food you eat are 200 times lower than any adverse effect observed in long term feeding studies. It's amazing how a little context can change the tone of an article.

    Also, from Monsanto's recent 10Q (sorry to interrupt the activism with a little investment talk - on an investment website) EBIT from Seed and Genomics (past 9 months) is $2,980M and Ag Productivity (the segment that includes Roundup) is $810M. Roundup has been off patent for 13 years and is currently manufactured by multiply suppliers. It's hard to imagine that a company with a 22 P/E would rest it's growth strategy on increased sales of a 40 year old post patent product that represents less than 25% of earnings.

    Also, pest resistance to control methods has been around as long as pests. There is nothing specific about biotech crops that make them more or less susceptible to resistance. Smart farmers use all of the tools at their disposal, in careful rotations, to manage the problem. Without glyphosate tolerate crops, farmers resort back to old chemicals like atrazine which have many more resistant weeds and a less positive environmental profile. Be careful what you wish for.

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