Monsanto Loses Billions in Brazil

Monsanto Faces Massive Loss of Royalties in Brazil

Written by Brian Hicks
Posted June 19, 2012

A recent ruling by the Brazilian Supreme Court of Justice may cause biotechnology leader Monsanto to lose billions in revenue from its genetically modified Roundup Ready soya beans. This decision is just the latest chapter in a drama that has seen millions of Brazilian farmers take Monsanto to court over payments they made to the company over the past ten years.

Brazil is the second-largest producer of GM crops after the United States. Last year, Brazil farmed a total of 30.3 million hectares of GM crops (mostly soya, but also cotton and corn). Brazil legalized farming of GM crops back in 2005. Crops grown from Roundup Ready seeds are resistant to the pesticide glyphosate, which is marketed as Roundup. Thus, farmers using these seeds can freely spray their fields with Roundup without worrying about their crops.

However, since 2005, Monsanto has charged Brazilian farmers 2% of all Roundup Ready sales, which today accounts for almost 85% of the nation’s total soya bean crop. Further, Monsanto also tests all Brazilian soya beans that are marketed as “non-GM.” If any of these are found to be Roundup Ready varieties, the company penalizes the farmers responsible nearly 3% of their sales.

The trouble began in 2009 when a group of farmers from Rio Grande do Sul challenged Monsanto, claiming that it was impossible to keep Roundup Ready beans separate from conventional varieties, and that the “Monsanto tax” was illegal and unjust. João Batista da Silveira, one of the leaders of this challenge, says that “The issue is that segregating GM and conventional soya is difficult, since the GM soya is highly contaminating.” Monsanto countered with accusations of lost revenue due to Brazil continuing to smuggle in Roundup Ready seeds, but the Brazilian Association of Seeds and Seedlings asserts that 70% of soya bean farmers buy their seeds legally.

Giovanni Conti, a judge in Rio Grande do Sul, decided in April that Monsanto’s levy was indeed illegal, and noted that the patents covering Roundup Ready seeds in Brazil had already expired. Monsanto was not only ordered to stop collecting royalties, but also to return all royalties collected since 2004. Alternately, they could pay back a minimum of US $2 billion.

Following an appeal by Monsanto, Conti’s sentence was suspended while the Justice Tribune of Rio Grande do Sul considers the case. However in 2011, Monsanto approached the Brazilian Supreme Court of Justice in an effort to restrict any decisions made by the Tribune to Rio Grande do Sul; evidently, Monsanto feared massive losses should that sentence be applied nationwide. On 12 June, the Supreme Court dismissed Monsanto’s appeal.

Despite the ill-will against Monsanto, some researchers worry about the fallout from such a large penalty. The Brazilian Agricultural Research Consortium (Embrapa) has a research agreement with Monsanto. Elibio Rech, an Embrapa researcher, said, “Although Embrapa has other financial sources, if the collection of royalties is interrupted then $5 million to $10 million dollars will be cut from our budget, which would stop some research projects.” Carlos Fávaro, president of the Mato Grosso association of soya bean and corn producers, also agreed that there could be negative effects as far as agricultural research is concerned. However, he also spoke out against the existing system, stating that “The way of collecting royalties is unfair, [Monsanto] charges us in double: when we buy the seeds and then when we sell the soy.”