Worst acquisition ever.
From Bloomberg, November 6:
The world’s most widely used weedkiller is confronting legal battles as well as a cat-and-mouse game with nature. But it’s not clear what can take its place.
The chemical that revolutionized farming over the last 50 years is in trouble.
Glyphosate, once vaunted for its ability to kill plants and spare animals, is under assault on both fronts. In the UK, weeds are for the first time refusing to die after being sprayed with the herbicide — a problem that’s long tormented American farmers, too. And thousands of former users in the US contend that the world’s most widely used weedkiller might actually be slowly killing them.
Earlier this year, a Georgia jury punished Bayer AG to the tune of almost $2.1 billion after a man who had used Roundup, the German company’s glyphosate-containing weedkiller, developed non-Hodgkin lymphoma. It was only the latest slapdown by a jury. Bayer has coughed up more than $10 billion in legal costs over a product it inherited last decade with its $63 billion acquisition of agrochemical producer Monsanto. Its legal battles are far from over, too, with Bayer facing more than 60,000 outstanding claims from US plaintiffs who say the chemical caused their cancer.
The litigation has cast such a massive cloud over Bayer’s stock, which is down more than 70% since the Monsanto deal, that Chief Executive Officer Bill Anderson is considering whether the company should even make glyphosate anymore.
“Basically it comes down to: We will either find a solution on these things or we will be exiting the business,” Anderson told reporters in August. Glyphosate may be an “essential tool for farmers to produce an abundant and safe food supply for America and frankly around the world,” he said, but the chemical hasn’t had a patent protection for 25 years and is hardly profitable at this point.
Read More: Bayer Hires Judith Hartmann as CFO in Latest Management Change
Still, leaving the business would cause a major hole in Bayer’s books. Glyphosate accounted for about 12% of its crop division’s €22.3 billion ($25.7 billion) in revenue last year — and much of the company’s lucrative corn, soybean and other seed offerings are designed for farmers using glyphosate in the first place.
Marketed as a cleaner and safer alternative to older herbicides, for 30 years glyphosate has offered a relatively simple commercial model: Farmers pay a premium for seeds that are genetically altered to resist the herbicide in hopes of boosting their profits through cheaper, easier weed management. At least $5 billion worth of the chemical is sprayed across the world’s fields each year, from the US and Brazil to China and New Zealand.
But the promise of that paradigm is breaking down amid the combination of weeds that have evolved their own tolerance to glyphosate and growing regulatory and legal challenges over the chemical. Recently, representatives for Bayer have even raised the specter of bankruptcy for the Monsanto division as they engage in high-stakes settlement talks with plaintiff attorneys, according to people familiar with the matter, who asked not to be named discussing private matters.
If Bayer ceases manufacturing glyphosate at its factory in Louisiana and a few related sites, it will expedite the world’s retreat from the chemical, eliminating about 40% of global production capacity in a single step. In the short term, that will leave farmers deeply dependent on supplies manufactured in China. In the longer term, it raises questions about how today’s farmers — some of whom have been nicknamed “Roundup Babies” for coming of age so reliant on the chemical — will feed the world’s growing population as global warming increases the risk crops face from storms, droughts and new types of pests.
“The climate is emerging as a gigantic problem that will compromise our sustainability,” warns Luca Comai, distinguished professor of plant biology at University of California at Davis.
But although the problems with glyphosate are becoming more urgent, it’s not entirely clear what might replace it.
“There are many, many ways of making the process of growing plants more effective and less impactful on the resources and the ecosystem,” Comai says. “Whether you can make money out of it, I don’t know.”
When Monsanto first developed glyphosate for agriculture in its St. Louis labs in the early 1970s, it wasn’t obvious that it would ever turn a profit. A tiny molecule, it works by binding to an enzyme in all plant cells (that animals lack) that helps create essential amino acids for growth. As a result, it pretty much kills everything — weed or crop — that’s green and grows.
Back then, US farmers preferred using other types of herbicides — in particular, ones that didn’t harm their crops. Farmers had other gripes about glyphosate, too. The chemical took days to kill unwanted plants and tended to quickly degrade in the presence of sun or rain, meaning it didn’t stick around in the soil to prevent weeds from emerging later in the season.
Monsanto tried to turn these drawbacks into strengths, marketing glyphosate as less harmful than other weedkillers, many of which were facing fierce criticism over their dangerous effects on people or their tendency to, say, leach into waterways and poison frogs and fish. Beyond that, Monsanto promoted its chemical as a great way to foster more “no-till” agriculture, in which farmers stop plowing their land with tractors and thus reduce carbon emissions and negative impacts like soil erosion and nutrient loss.
But that strategy only really triumphed after Monsanto scientists stumbled on a glyphosate resistance gene in an unlikely place — the waste ponds of the company’s glyphosate factory on the banks of the Mississippi River. There, bacteria had evolved a gene that blunted the chemical’s attack and were thriving. The Monsanto scientists isolated the genetic matter and transferred copies into soybean seeds, kicking off the farming world’s new, genetically modified era....
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