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Corn+Soybean Digest

Brazil Agrees To Pay Royalties

It's been a long time coming, but there's been a solid step forward on getting Brazil to pay Roundup Ready technology royalties — just like you do.

As you read this, Brazilian farmers are running full tilt to complete this season's harvest. As they do, for the first time ever they'll be charged a royalty on the biotech soybeans they're harvesting. That is if a new royalty collection system takes off.

It's estimated that pirated Roundup Ready soybeans coming from Argentina amount to as much as 35% of the beans sold in southern Brazil.

In a determined effort to get payback on its Roundup technology, and to level the playing field between Brazil and U.S. farmers, Monsanto is close to inking a deal on a new royalty collection system. At press time, the company announced a verbal agreement with several trade groups representing Brazilian growers, along with major grain handlers, for a technology payback system.

When instituted, the new value-capture system will have grain handlers or co-ops assess a fee of approximately 20 reals/ton (about $7/ton) when Roundup Ready soybeans are delivered from the farm to an elevator or crushing site.

The elevator or co-op will then deduct the fee directly from the farmer's payment. The elevator, in turn, will pay Monsanto the $7/ton fee. The system will begin in only two southern states: Santa Catarina and Rio Grande do Sul.

“We have confidence in how this will work,” says Mike Frank, vice president of product management for Monsanto. “This royalty collection system allows us to collect regardless of what happens in the short term with regulatory or government approvals on commercialization of Roundup Ready soybeans.”

According to Frank, a few elevators in each state will be designated non-GMO. The others have openly agreed to accept biotech beans and therefore are willing to collect the fee.

“At the non-GMO elevators, we'll put rigorous testing protocols in place so every load coming in will be tested,” Frank says. “If a grower claims his beans are non-Roundup Ready and they test positive, he'll be assessed a penalty plus the $7/ton fee.”

Frank says Monsanto will assist elevators in testing and will be there to enforce the new agreement. “Growers will be penalized for misrepresenting their grain,” Frank says.

Monsanto will foot the bill for start-up costs with this new system, not elevators or co-ops. Still, Frank points out that Monsanto doesn't expect any significant monetary payback this first year because of the new system's start-up costs.

For 2004 and 2005, the agreement price of $7/MT won't budge. By year three, however, Monsanto has the option to renegotiate the fee.

From the American Soybean Association's standpoint, it's a significant step forward and begins to correct the problem of seed piracy, says President Ron Heck.

“We support their efforts,” he says. “For farmers, it's raising the price of Brazilian beans f.o.b. (free on board — transportation costs paid by the buyer) at the port, which means they can't compete against us based on stolen beans.”

The long-term question, of course: Once Monsanto begins capturing royalty fees from Brazil, will it pass along the savings to you by reducing — or at least not increasing — the royalty fees that accompany your seed purchases?

Time will tell.

Greg Lamp
[email protected]

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