Monsanto says Brazil soy exporters to pay GE royalty

3.00pm

SAO PAULO - Brazilian soybean exporters are expected to pay royalties starting in 2004 for shipments of Monsanto Co.'s genetically engineered "Roundup Ready" soybeans, the US-based biotech behemoth's Brazilian subsidiary said today.

The royalty payments could have a significant impact on Monsanto's revenues because Brazil -- the world's No. 2 soybean producer and exporter after the United States -- accounts for over a quarter of the world's soy supply.

But exporters said they were sceptical of Monsanto's plans to use them as "collection agents" to get revenues from Brazil's thriving illicit GE soy market, which official seed suppliers estimate at over 30 per cent of the crop.

Brazil is the only agricultural producer of its size that still bans the commercial planting and sale of genetically engineered (GE) crops. Its government has granted amnesty until early 2004 for producers growing black-market GE soy.

Monsanto, of St. Louis, pioneered the development of soybeans and other crops genetically engineered to resist harm from its product Roundup -- the world's best-known herbicide brand.

Its Brazilian subsidiary said negotiations were proceeding well with exporters, whom Monsanto expected to sign royalty contracts by Aug. 1 for 2003/04 soy crop exports.

"We've been negotiating (with exporters) for two months and we are very close to closing these contracts," Monsanto's marketing director Felipe Osorio told a news conference.

Roughly 35 local exporters account for 95 per cent of the country's shipments of soy abroad.

Most of the Roundup Ready seeds are believed to have been smuggled into Brazil from Argentina and Paraguay, where they are legally planted.

Osorio said no value had been set yet, but estimated royalties would range between US$15 ($26) and US$66 ($115) per hectare (2.471 acres) of soy depending on regional yields, which vary from roughly 1.9 tonnes to 3.1 tonnes a hectare across Brazil's soy belt.

Brazilian producers, Monsanto said, pay an average of US$15 per hectare to get its Roundup Ready seeds (considering seeds that producers save and those they bring in illegally from Argentina).

In the United States, the cost to get Roundup Ready seeds is $67.45 ($118.14) per hectare and, in Argentina, the cost is US$49.83 ($87.28). That difference gives Brazilians an advantage, Monsanto said.

Brazilian shipments of soybeans to countries where Monsanto holds a patent for its Roundup Ready soybeans will have to show receipts to importers for royalties paid, Osorio said.

The United States, Canada, Japan and most European countries honour Monsanto's Roundup Ready patents.

But China -- Brazil's largest soybean customer -- does not recognise Monsanto's intellectual property rights to Roundup Ready soy.

Exporters would have to discount what they paid producers and co-operatives for Roundup Ready soy to compensate for royalties paid to Monsanto.

"Clients on the global level are demanding just treatment," said Osorio, who noted that producers in the United States and Europe complained they could not compete against Brazilian producers who were not paying for the GE technology.

But exporters said it was not their responsibility to collect Monsanto's royalties.

"I'm not saying it's impossible to get royalties from Brazil," said a soy director for a large US-based multinational grain company in Brazil. "But I don't know what exporter would agree and it would be difficult to enforce."

Traders said Brazil has no universal origination system to trace the soy seeds' origin. Illegal GE soy, grown mostly in the south, is mixed in with conventional soy.

"Who knows who brought the GE soy to the co-operative and how much?" asked another trader at a large multinational grain company. "The exporters aren't responsible for collecting Monsanto's royalties in other countries. Why should we agree to be collection agents? It's the producers who should pay."

Despite recent government efforts to curb the illegal GM soy market in Brazil, Monsanto said it expected the planting of Roundup Ready soy to increase with the next crop, when planting begins in September.

Importers from countries where Monsanto holds a patent are supposed to check if soy cargoes are licensed. They can be sued for piracy if they accept Roundup Ready soy without a license.

Monsanto's stock rose 1 per cent to US$21.15 on Wednesday on the New York Stock Exchange, not far below its 52-week high of US$27.50 hit on June 10, 2002.

- REUTERS