Monsanto's Biotech Makeover Takes Root
It scores with corn and soybeans. Next up: battling drought
Rows of crops at a Monsanto test farm near Jerseyville, Ill., can read like passages from the Old Testament. These sick-looking plots of corn are beset by a plague of beetles, those by a plague of moths. And back in the corner of one field, deprived of moisture amid a midwestern heat wave, stands corn with stalks that are browning and leaves curling. The plants are suffering from the first signs of drought, the indiscriminate killer that has most vexed agriculture since its beginning.
Growing next to the wilting corn is Monsanto's future: rows of corn that are equally parched but that stand taller and greener. They carry a gene, developed by Monsanto scientists, to help the corn weather a dry spell. It's a trait that Monsanto executives are betting will drive the company forward another decade, if not longer.
Drought tolerance is a potential blockbuster, bringing benefit to farmers worldwide and riches to the company that successfully gets it to market. "It has immense, global appeal," Monsanto Chairman and CEO Hugh Grant says at the company's St. Louis headquarters. "It has the potential to reshape this company one more time."
That's saying a lot for Monsanto, which entirely remade itself during the past two decades. It has shifted from an industrial chemical company to one focused almost entirely on plant breeding, most notably in the science of transplanting genes from one species to another. When he joined the company in the early 1980s, says Chief Technology Officer Robert Fraley, "we owned oil fields, turning the oil into plastics. Now we're entirely about seeds and biotech."
"Frankenfoods." The company weathered tough years in the transition. Monsanto had spun off its chemical business in the 1990s and was briefly owned by Pharmacia, a pharmaceutical company that wanted Monsanto's drug-related lines. Pharmacia spun off Monsanto's ag-related business in 2000. The new Monsanto struggled at first, losing two chief executives in three years and about $1.7 billion in 2002. Its stock tumbled more than 50 percent that year to about $7 a share. Having placed all its bets on biotech, Monsanto was stalled amid widespread controversy over its genetically altered soybeans and corn, derisively called "Frankenfoods" by critics abroad and at home. The company was also seen as a corporate bully, trying to ram the new technology down the throats of farmers, a conservative lot who were hesitant to adopt radically new approaches. Suspicion of the company's motives was fueled by its first successful genetically modified crop, a soybean that encouraged the use of a key chemical that Monsanto had maintained in its portfolio—the already hugely successful Roundup herbicide.
Then, in 2003, things began to turn around. The third CEO in three years was Grant, a longtime company man who brought a lilting Scottish accent to the corner office and a gentler approach to working with regulators and farmers. And farmers began to see significant benefits from planting Monsanto's Roundup-ready soybeans. "There was an inflection point five years ago," Grant says.
Sales had already been rising for the soybeans, which made it easier for farmers to protect their crops from choking weeds, and the company eked out a small profit in 2003. This year, an astounding 91 percent of the 64 million acres planted with soybeans nationwide will carry that Roundup-ready gene. But what has sent Monsanto's stock soaring, today at about 10 times its 2002 low, were gene-altered hybrids in the larger, faster-growing, ethanol-fueled corn market. Monsanto succeeded there with genes that also make corn tolerant of Roundup, as well as others that kill pests that feed on the plant's roots and leaves. Some of the company's best profits come from "stacking" all three traits into one seed. In 2006, Monsanto's profits reached nearly $700 million, and they're on track to hit $1 billion this year.
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