Monsanto Company (NYSE:MON) has had a controversial history, but never before has it been accused of causing cancer to fight America's War on Drugs. Here's what you need to know.
One of its most important products, glyphosate, has been around since 1974. It's used in over 160 countries around the world, and Farm Chemicals magazine called it one of the "Top 10 Products That Changed the Face of Agriculture." More popularly known by its brand name, Roundup, homeowners use it to keep their driveways pretty, farmers use it control weeds, and, starting around 15 years ago, the U.S. government has used it to help fight its war on drugs.
Since around 2000, American contractors have disbursed glyphosate over Colombian land in an effort to stymie coca crops, the active ingredient in cocaine. According to The Economist, glyphosate-laden crop-dusters cover around 321,000 acres of Colombian land each year. That's equivalent to a whopping 8.2% of the country's entire arable land.
Proponents say that Monsanto, glyphosate, and the American people have helped cut coca output to one-third of its peak in the late '90s, but recent evidence suggests otherwise. In 2014, coca cultivation jumped 40%. For some, that points to the need for more crop dusting. For others, it points to its overall ineffectiveness.
The debate escalated to a new level in March, when the research arm of the United Nations World Health Organization deemed glyphosate "probably carcinogenic to humans." The report notes the limited data to support direct effects on humans, but points to both results from lab studies on animals and DNA damage to human cells as evidence that glyphosate may not be the clean weed killer it was once thought to be.
For Colombian president Juan Manuel Santos, enough was enough. The blunt edge crop-dusting approach, combined with this recent study and observations of diseases and miscarriages among Colombian farmer families, prompted Santos to ask for a full halt to the program by October. It seems Colombia will eradicate glyphosate long before cocaine.
Monsanto makes moves
Monsanto isn't taking this criticism lying down. Its glyphosate FAQ page covers questions as varied as "is there a harmful effect of glyphosate on honey bees?" and "is glyphosate in urine a cause for concern?"
The company cites 40 years of use, more than 800 studies demonstrating its safety, and its widespread global adoption as evidence of its safety. Its strongest evidence comes from other third-party reviewers such as the U.S. Environmental Protection Agency, which finds no evidence of carcinogenicity for humans.
Currently, glyphosate remains an important ingredient in Monsanto's income recipe. For fiscal 2014, the company noted that its glyphosate-based herbicides were the primary contributor to its $994 million (7%) increase in net sales to $15.9 billion.
But despite the media frenzy, glyphosate may already be on the way out from Monsanto's core product line. Monsanto discovered and patented the herbicide in 1969, but that patent expired in 2000. That means this weed killer can now be manufactured by anyone, and many other companies have since registered their own versions of Roundup.
In Monsanto's most recent annual report, the company also noted that glyphosate itself is in high supply, meaning that margins are expected to tighten for Monsanto and all its competitors in the coming years.
But the company isn't waving goodbye to glyphosate yet. As Monsanto looks to the future, it will likely continue to build out "Roundup ready" seed varieties that make Roundup harmless to crops while still killing weeds. In fiscal 2014, a $449 million increase in net sales for soybean seeds and traits was driven by increased royalty collections for Monsanto's Roundup Ready 2 Yield soybeans. This could keep Monsanto interested in the glyphosate debate long after its own herbicide margins have been battered down by generic alternatives.
Foolish bottom line
So is Monsanto a drug killer or cancer causer? Currently, the answer seems to be neither. Glyphosate may be symptomatic of a failed supply-side attempt to eradicate cocaine from a country starved for alternative options. And while this latest report points to some carcinogenic evidence, a single study isn't enough to overwhelm the mountains of regulatory reviews and approvals glyphosate has already accrued. For now, at least, Monsanto will continue with business as usual, Colombia or not.
Justin Loiseau has no position in any stocks mentioned, but he does eat plants. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.