The Smart Money: How Vermont might change the business of farming

Posted Monday, June 9, 2014 in Analysis

The Smart Money: How Vermont might change the business of farming

by Gina Hamilton

Vermont is the land of happy cows and hippies who make ice cream flavors named "Cherry Garcia" and the birthplace of snowboarding. It is a place where the worst fiscal crime that's occurred in the last 50 years has been maple syrup smuggling.

And that might have been all anyone ever needed to know about Vermont, except that this year, Gov. Peter Shumlin signed a bill called "Vermont Right to Know GMO." It doesn't prohibit genetically modified organism-based foods in Vermont, but it will require them to be labeled by July of 2016.

Big agribusiness is howling, in part because, as a president of one of Monsanto's subsidiaries put it in 1994, "If you put a label on genetically engineered food you might as well put a skull and crossbones on it." (Norman Braksick, president of Asgrow Seed Co., quoted in the Kansas City Star, March 7, 1994). 

Big agribusiness claims genetically modified organisms are safe, and in some cases, healthier than organic produce. They have other benefits, they say, including being able to raise more food on smaller plots of land.

The other reason Big Food is getting heartburn is that Vermont borders three states, one of which borders Maine, which has already signed a bill mandating GMO labeling.

And why this matters is that Maine's law goes into effect only if five contiguous states also require labels.

Connecticut has also signed legislation, and advocates for disclosure say that there is enough support in Massachusetts to pass a law before July 31, although they acknowledge they don't know if a vote will come up before then.  If Massachusetts passes a law, that would just leave New Hampshire to advance a bill. The last bill that came up for a vote was killed in January, but New Hampshire is still actively pursuing legislation.

According to a recent poll by the New York Times, 93 percent of Americans would like to have GMO ingredients identified in labels on their food. The 19 EU states refuse to accept GMOs at all, citing concern for pollinators.  This is creating an export crisis for American wheat, corn, cotton, and soybeans, which can't find a market in Europe, and in 30 other countries including Japan, New Zealand, Mexico, India, and Australia. A million people in Canada signed a petition to get out of GMO foods — one thirtieth of the population. A majority of citizens in British Columbia favor a ban. In April, China rejected GMO corn and soybeans from the U.S., causing U.S. exports to drop 85 percent. That's a loss of $2.9 billion for U.S. farmers. China says that U.S. GMO-engineered soybeans cause infertility. Last July, Monsanto dropped a bid to advance three GMO crops to be grown in Europe.

Any rational company would look at its product, look at its market, and throw in the towel at this point, but not American agribusiness. Instead, they're planning to sue any American state, county, or town that refuses to allow GMO products to be sold unlabeled. States that have signed such bills are already collecting funds for legal defenses. Within days of Vermont's governor signing the labeling law, the Grocery Manufacturers Association announced it would sue to stop the law from taking effect.

The Biotechnology Industry Organization, the world’s largest industry trade group representing Monsanto Corporation, which manufactures "Roundup Ready" seeds, Dow Chemical and other seed producers, says the labeling law will cost the average household $400 more annually for groceries.

“Roundup Ready” seeds can be used with heavy doses of herbicide, which Monsanto, conveniently, also sells.

One reason is consumer demand will force food producers to source more expensive non-GMO commodities to avoid what the group calls a perceived “warning” label.

The real reason, is, of course, money — not yours, theirs.

In August of 2013, Monsanto CEO Hugh Grant dumped 40,000 shares of Monsanto stock at just $97.74, and a couple of other high-level executives ditched another 20,000 shares at about the same price. Hedge funds are dumping Monsanto stock too. 

The rationale is that Monsanto has developed "negative sentiment." That is, people increasingly don't like Monsanto's products, or its business strategy that sues farmers, consumers, and states for choosing or wanting to choose something other than what Monsanto is selling. The tide turned against Monsanto when an open field wheat experiment in Oregon got out of control last year, contaminating neighboring fields, and leading to numerous countries refusing American wheat because no one could be sure that the wheat wasn't Monsanto GMO wheat. The kicker was that the farmers whose wheat crops were contaminated got sued by Monsanto for patent infringement. 

Monsanto is worth $21 billion, employing nearly 21,000 people around the world. Its herbicides and pesticides make up about $15 billion of its assets, with the remainder seed crops. A small percentage of the seed business is GMO, but there is some crossover with the herbicide division. Even though the GMO crop seed is a small amount in number of seeds sold, in the quarter ending in March 2013, GMO seeds alone made Monsanto a tidy profit of $1.48 billion, which was up 22 percent over the year before. About 70 percent of corn and cotton grown in the U.S. is "Roundup Ready."

Losing this profit would be a serious hit for Monsanto, and other seed companies that have jumped on the GMO bandwagon, especially since competing seeds aren't "terminator" seeds; that is, farmers can save seed from year to year with many types, but not GMOs, which aren't fertile. Farmers have to buy seeds from the company year after year, which is a very expensive proposition. The cost to plant an acre of soybeans went up 325 percent between 1995 and 2011, owing to GMO seeds. Cotton acres went up 516 percent, and corn acre prices went up 259 percent over the same period, as GMO "Roundup Ready" seeds became the norm in the American heartland.

No one can blame Monsanto and the other Big Food companies for wanting to hold onto those dollars. But there is no reason we should have to let them.

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