A Seedy Business.

Monsanto is pushing its gene-altered seeds on Brazilian soybean farmers. But government officials are proving strongly resistant.

HUMBERTO FALCAO, A SOYBEAN farmer in the Brazilian state of Rio Grande do Sul, is always looking for ways o improve his harvest. So when he heard about gene-altered seeds developed by U.S.-based Monsanto Corp. that were resistant to bugs, viruses and fungus, he was eager to try them out.

He won't get the chance any time soon. Last June, a Brazilian federal court judge temporarily halted Monsanto's hopes of marketing the seeds in Brazil until the federal government can regulate and define the rules of bio-safety. "I believe that the irresponsible speed to introduce the advances of genetic engineering is inspired by the greed of economic globalization," Judge Antonio Souza Prudente wrote in his decision.

The ruling enraged soybean farmers like Falcao, who believes ample testing shows that transgenic seeds are safe for the environment and consumers. "In a democracy, we should have the right to choose new technology," says Falcao, who also serves as vice president for the Association of Rio Grande do Sul Seed Producers.

And what a technology it is. Falcao and many other farmers claim that modified soybeans increase crop yields, making farmers more competitive on the world market. Most importantly, they say it saves up to $70 a hectare (2.4 acres) since the seeds are as resistant to weeds and worms as a strong pesticide. Monsanto's Roundup Ready and other altered seeds eliminate the need for a more expensive--and potentially harmful to the environment--combination of toxins to fight off insects and disease.

But critics say the seeds manufactured by Monsanto, the world's second-largest seed company and third-largest agrochemical company, could accelerate the evolution of resistant insects. They say that the spread of new genes to weeds via wind-blown pollen could lead to the inadvertent creation of "super weeds" that won't die when sprayed.

Mutant grub? There is also the fear that more studies are needed to gauge long-term health effects from eating transgenic foods. In the United Kingdom, such products have been dubbed "Frankenstein Food" and "Mutant Grub." Just last May, a European Union commission postponed a decision on Monsanto's gene-altered corn after laboratory studies at Cornell University found that pollen from the corn, when eaten by larvae of Monarch butterflies, killed nearly half and stunted the rest.

For Monsanto, a St. Louis-based company, the stakes in Brazil are high. Monsanto Brasil is the parent corporation's leading moneymaker outside the United States, generating revenues of $650 million in 1998. The company plans to build a $550 million plant in the northern state of Bahia to supply Roundup, the world's largest-selling herbicide. "Brazil is an important market for us and a major global soybean player," says Lisa Watson, a Monsanto spokeswoman based in Washington, D.C.

James Wilbur, who follows Monsanto for Salomon Smith Barney in New York, calculates that the licensing of transgenic soybean seeds to Brazilian farmers would add $1 billion a year to the multinational's coffers if--as expected--it quickly captured 50% of the soybean market.

But that would just be the beginning. Once soybeans are given the green light, Monsanto plans to introduce into the world's eighth-largest economy 10 more modified crops, including corn, cotton and other varieties of soybeans.

"Transgenic-free" states. Today, only three countries--the United States, Canada and Argentina--commercially grow transgenic soybeans. About 45% of U.S. soybeans are genetically engineered. That leaves Brazil, the largest soybean producer after the United States, as the only major grower not using Roundup Ready, which accounts for about one-fifth of Monsanto's annual sales of $8.6 billion. Last year, Brazilian soybean growers harvested 31.5 million metric tons and exported $4.7 billion in soy and soybean products, according to Brazil's Ministry of Industry and Commerce.

Monsanto's eagerness to sell genealtered seeds has become a major trade issue in Brazil at a time when worldwide transgenic crop sales for products ranging from potato chips and microwave popcorn to ketchup and soy sauce have skyrocketed from $4 billion in 1997 to $19 billion, according to Salomon's Wilbur.

In the past year, federal courts have intervened twice after Monsanto received approval by the federal government to sell transgenic soybeans, and two farm-state governors have vowed to make their areas "transgenic free"

In recent months, Rio Grande do Sul Governor Olivio Dutra has halted transgenic seed production at 79 experimental sites, claiming the farms lacked proper environmental-impact studies. Rio Grande do Sul is Brazil's third-largest soybean-producing state with a harvest of 4.2 million metric tons in 1998.

In Mato Grosso, Brazil's second-leading soy producer at 7 million metric tons annually, state congressman Gilney Viana has called for an official investigation into transgenic products. Next door in Mato Grosso do Sul, a state with 42 experimental corn plots, Governor Jose Orcinio dos Santos has called for a five-year moratorium on gene-altered seeds.

The press has also questioned Monsanto's right to patent its seeds. Under the headline "Genetic Bomb," a recent editorial in the Rio daily Jornal do Brasil criticized Monsanto for forcing U.S. farmers to sign patent agreements not to save seeds from one harvest to the next. "Transgenic soybeans would be economically disastrous, joining the most important sector of our agricultural exports to one or two suppliers with a world monopoly on seeds," the editorial read.

Even some soybean farmers have questioned the wisdom of selling transgenic crops to Europe, which is Brazil's largest buyer of soybean oil, clamoring for conventionally grown soybeans: "Each week, we exchange information with Europeans who tell us stories about mad cow disease and tainted Coca-Cola," says Antonio Wustin, president of Rio Grande do Sul's 6,500-member Cotrimaio Agricultural Cooperative. "They are afraid of transgenic products."

Rio Grande do Sul Agriculture Secretary Jose Hermeto Hoffman argues that banning transgenic crops makes good economic sense because Europeans are willing to pay more for conventional soybeans. Over the last few months, he has received several delegations from Europe's largest supermarket chains and food producers, including France's Carrefour and the United Kingdom's Tesco, Marks & Spencer, and United Biscuit. Each has told him that they are willing to pay a higher premium for non-altered soybeans.

"Brazil has the historic opportunity to become the world's largest producer of conventional soybeans," Hoffman says. "That would give us a captive market."

Yet farmers like Falcao doubt Europeans will pay that much more for conventional soybeans. He says state farmers are so anxious to use transgenic seeds that they are buying them from door-to-door salesmen from neighboring Argentina, where the seeds are legal. He says farmers have already planted 642,000 acres, or 30% of the state's crop, with contraband seeds.

In the meantime, the trade war continues. Monsanto has appealed Judge Souza Prudente's ruling and expects to sell Roundup Ready seeds and Roundup herbicide for the 1999/2000 planting season, which begins this fall. "We are working through the appropriate channels to ensure that the process moves forward," Monsanto's Watson says.

Agriculture Secretary Hoffman is fighting it, launching a media blitz on radio and television warning soybean farmers that the state will confiscate transgenic seeds. He has also set up inspection offices and checkpoints in every municipality and four state laboratories to detect and eliminate any transgenic residuals from suspect crops. We will wipe out transgenic soybeans by early next year," Hoffman predicts.

Falcao thinks that's wishful thinking. "If the authorities insist on banning it," he says, "they will have to build a Berlin Wall around our borders."

A Wild Ride

MONSANTO'S QUEST TO SELL GENE-ALTERED seeds to Brazilian farmers has been a roller coaster ride in comparison with neighboring Argentina, the second-largest producer of transgenic soybeans after the United States.

In Argentina, there has been little debate since transgenic soybeans were first introduced in 1996. Nearly half of the nation's soybean crop is now estimated to be Roundup Ready.

In Brazil, Congress allowed Monsanto to create experimental plots under the auspices of a government panel called the National Technical Commission for Biological Safety (CTNBio). There are now 642 such sites growing corn, soybeans, sugar cane, cotton, eucalyptus, tobacco, rice and potatoes. Another 230 plots are awaiting authorization, according to the Ministry of Agriculture.

Last September, the CTNBio ruled that Monsanto could produce transgenic soybean seeds because its studies showed the seeds posed no threat to the environment, human beings or animals, Federal Judge Raquel Perrini, however, issued a court order against production, describing the seeds as" offensive to consumer health."

Six months later, another court ruled that Monsanto could plant, harvest and store Roundup Ready soybeans in the state of Rio Grande do Sul. Governor Olivio Dutra then issued the decree closing down all experimental plots until scientists could prepare an environmental-impact study.

At the same time, Monsanto withdrew an application to register its transgenic soybeans as intellectual property after a storm of protests. At the time, a Monsanto spokesman told reporters that the company was making revisions to its application.

In May, the federal Ministry of Agriculture authorized the commercialization of five types of transgenic seeds, clearing the way for Monsanto Brasil to produce Roundup Ready seeds and Roundup herbicide for the 1999/2000 planting season. The ministry argued that there were no legal grounds to stop it.

But environmental group Greenpeace and a consumer rights group called the Consumer Defense Institute sued to stop authorization. In June, Federal Judge Antonio Souza Prudente agreed with their arguments and issued an injunction against commercialization of transgenic soybean seeds. Monsanto has appealed the ruling.