Company also now faces lawsuit over wheat discovery

Jun 7, 2013
by DTN

Monsanto Co. shared a validated testing method for identifying the Roundup Ready wheat trait with USDA and concerned importing nations, the seed company said in a statement late last Monday. It’s a development that could soothe fears of widespread contamination of U.S. wheat supplies among some of the U.S.’ key export markets.

Meanwhile, a Kansas farmer sued Monsanto, alleging gross negligence in how Monsanto managed the risks associated with its research into the genetically engineered (GE) wheat. It also claimed the farmer was damaged by future market swings and lost export markets.

On June 29, USDA announced it was investigating a positive test for Monsanto’s glyphosate-resistant trait in an 80-acre field in Oregon. It has since sent as many as 15 investigators to the state. Japan and South Korea halted imports of U.S. white wheat, including soft white wheat, which is the primary type of wheat grown in Oregon, until US- DA tells them more.

Both countries, along with the European Union and Taiwan, have asked Monsanto and USDA for a testing method to determine if previously purchased shipments contained the unapproved trait.

Monsanto shares testing method

The company said the test was designed in line with “rigorous global testing protocols” and is more reliable than current tests designed for other crops— notably corn, soybeans and cotton—that contain the Roundup Ready-resistant gene. Other existing test technologies have a history of generating false positives when applied to wheat.

“We have cooperated with the USDA and other regulatory authorities so that they can continue to have full confidence in U.S. wheat exports,” said Philip Miller, vice president of Regulatory Affairs for Monsanto, in a statement. “While the US- DA has noted that they have no evidence that the original Roundup Ready wheat trait has entered commerce, our support is aimed at ensuring that the U.S. wheat industry and wheat farmers do not experience disruptions in exports.”

White wheat makes up roughly 17 percent of U.S. exports, and in the 2012-13 marketing year, the U.S. sold Japan slightly more than 1 million metrictons, about 38.2 million bushels.

“I think that it is interesting that the test Monsanto provided sounds as narrow as it could possibly be—it only identifies the Roundup Ready trait, but in this case, that may be all that is needed,” said DTN grain analyst Todd Hultman.

“Japan has said that they are waiting to hear the results of USDA’s investigation and that is the prudent answer. Because it sounds like this test will allow potential buyers the ability to make sure that their purchases are free of the Roundup Ready trait, I do think that it solves the market’s immediate concerns and will eventually lead to a resumption of U.S. white wheat exports. Unless something unexpected comes out of USDA’s investigation, this issue should fade to black.”

Monsanto said it will provide the testing method to any other agriculture regulatory authorities that request it.

“We are interested in getting to the bottom of this reported detection in a single field in Oregon,” Miller said. “We’re prepared to provide any technical help that we can as this unusual and currently unexplained report raises important questions about the circumstance and source of the presence.”

In a statement, Monsanto said its process for closing out research was welldocumented and audited. It didn’t have a test site in the field in question and doesn’t believe a seed left in the soil or wheat pollen flow serve as a reasonable explanation for the reported detection at this time.

First civil lawsuit filed

Morton County, KS, farmer Ernest Barnes filed a lawsuit against Monsanto last Monday alleging gross negligence following the discovery of GE wheat in Oregon last week.

The case was filed by Susman Godfrey, along with co-counsel the Murray Law Firm and Goldman Phipps, PLLC, in the U.S. District Court for the District of Kansas.

The complaint alleges Monsanto tested GE wheat “knowing full well that release of its experimental seed into the general wheat population could result in the loss of huge domestic and export markets.”

It argues that Monsanto knew that wheat is a crosspollinating plant and “failed to keep proper safe zones between fields and failed to utilize other measures such as tarps to prevent the genetically modified wheat from escaping the test areas and cross-pollinating and thereby contaminating fields that were supposed to only contain non-genetically modified wheat.”

The lead legal firm on the case, Susman Godfrey, said in a press release that it specializes in high-stakes commercial litigation. They’ve also hired the same litigator, Martin Phipps, who handled the GE rice case back in 2006, in which Bayer paid a $750 million settlement to roughly 2,500 rice growers in addition to jury awards in individual cases.

One of the other trial lawyers involved in the case, Stephen Murray, said in the news release: “The full extent of the damage Monsanto has caused is not yet known, but we are committed to helping farmers as the extent of the wheat contamination becomes clear.”

The complaint argues that the plaintiff was harmed by the GE wheat news because of its impact on wheat exports and “steep declines in futures prices.”

However, the primary type of wheat grown in Kansas, hard red winter wheat, does not face export bans. Japan bought hard red spring wheat and hard red winter wheat from the U.S. the day after the GE announcement was made, according to the U.S. Wheat Associates.

Futures markets are also trading higher than they were before the announcement was made on May 29.

July Chicago wheat prices at midday on Tuesday were trading at $7.09 3/4 and Kansas City futures were trading at $7.51, compared to May 29 closes of $7.02 3/4 and $7.47 3/4, respectively.

The effect on basis has also been negligible, said DTN Senior Analyst Darin Newsom.

“Remember that there is often an inverse relationship between futures and basis, particularly as harvest draws near. So the gain of 15 cents in the Chicago futures market (through Monday) resulted in a weakening of white wheat basis of roughly the same 15 cents. In Kansas City the futures market has rallied 8 cents while white wheat basis vs. the HRW futures market dropped about 6 cents,” he said.

“Now, the real indicator is the Portland cash market that has fallen out of bed. This tells me that the collapse is localized to the Oregon market, not really affecting a wheat farmer in Kansas.” — Katie Micik, DTN