BUENOS AIRES, Argentina (OsterDowJones)--Members of Argentina's agricultural community Jan. 21 expressed concern over a recent decision by biotech giant Monsanto Co. to stop selling soybean seeds in Argentina.

Jan. 19, Monsanto confirmed it had stopped selling the product here as the trade of illegal seed spirals out of control and plunders profits from legitimate sales.

"It is very bad that a company that investigates and produces soybean seeds would decide to stop producing," said Luciano Miguens, president of Argentina's Rural Society, or SRA. "We need to control the illegal seed market so this is can be a profitable business."

Meanwhile, industry officials said Monsanto's decision also calls attention to another problem, which they described as a potential threat to local soybean farmers.

"Farmers are going to be jeopardized because they won't have access to the latest technology," said Julio Ferraroti, director of Relmo, a competitor of Monsanto's and Argentina's oldest seed research and production company.

"They won't have the best-yielding seeds or the ones that are most resistant to insects and disease," Ferraroti said. "Access to the latest technology is one reason for the intense growth of our soybean industry."

Farmers do not face an immediate risk, Ferraroti said, but they will have problems in the future if the illegal seed trade is not reduced.

"The potential risk is undoubtedly that farmers will lose ground against producers in countries such as the U.S., who have access to the latest technology," he said.

Losing money in a booming market

The SRA's Miguens said it is ironic that a company like Monsanto, one of the world's leading seed and agricultural technology firms, cannot profit from the seed business in Argentina, where soybean production is booming.

As the world's No. 3 soybean producer, Argentina has almost tripled its soybean output over the past decade, boosting production to 34.8 million metric tons in 2002-03 from only 11.7 million in 1993-1994, according to government data.

This increase is due largely to the use of genetically modified seeds such as those sold by Monsanto, analysts say.

Almost 100 percent of Argentine soy is genetically modified.

"Given the tremendous boom in the soybean market, it seems strange that producing these seeds is no longer profitable," Miguens said.

But Miguens said the genetic makeup of soy seeds available in Argentina makes it easy to use the seeds repeatedly without paying royalties.

"After buying new seeds, many producers keep them for a second and third generation, reusing them year-after-year," Miguens said. "The productivity of these seeds is almost as good as the original ones, which makes it very hard to prevent farmers from doing this."

The problem Monsanto and others face is simple.

"By law, producers are allowed to store seeds that they have bought from the previous year," said Ricardo Grether of Argentina's Rural Confederations, or CRA.

Because of a loophole in current laws, this means that a farmer who bought new soy seeds from Monsanto in 1999 can legally to plant the offspring of those seeds today. Moreover, the same farmer does not have to pay any kind of royalty to Monsanto to plant those seeds.

"This is absolutely true," according to Pablo Adreani, director of AgriPAC consultants. "In the case of soybeans, producers can buy seed one year and continue to work off the same seeds for the next four or five years.

This is not the case with hybrid corn or sunseed, which producers have to buy every year and pay a new royalty each time."

But this is not the only obstacle facing Monsanto's search for profit, according to Grether.

"It is one thing for producers to store seeds for their own use and something entirely different for them to store seeds and then sell them to other producers for a profit," Grether said. "This is where the real problem is--and this is why the illegal market has grown so much."

Grether and others said the time has come for seed producers, farmers and the government to sit down and design a new legal framework that allows for companies like Monsanto to profit from developing new soybean technology.

"We think it is important to protect intellectual property rights," said Miguens. "We all need to get together and create a system that rewards research."

This may be a bit tricky.

While farm groups want access to the latest technology, they do not want farmers to pay "excessive" royalties to seeds companies year after year. Moreover, there is disagreement about which companies should get paid and how much they should receive.

"The government wants to come up with some kind of global royalty, whereby all seed producers are paid for production," said Grether. "But this would not be fair given that some companies make better seeds than others."

Still, industry leaders said the government is eager to solve the problem.

"Fortunately, the Agriculture Secretariat is working to develop a system whereby companies can be compensated for their investments and this is very good," said Ferraroti.

For its part, Monsanto has said its decision to stop selling soybean seeds was based on dollars and was not an effort to pressure the government into taking action.

"The government is preparing a legal framework to fight the problem," Monsanto spokesman Federico Ovejero said Jan. 19. "We're confident this will be reversed and that we'll be able to return to the business."

The numbers

Argentine farmers planted almost 14 million hectares of 2003-04 soybeans.

However, only 18 percent of this was planted with legally sold soybean seeds, according to local media reports.

Royalties from these seeds totaled around $75 million, compared with the $400 million that would have been collected if the seeds had been bought legally.

Finally, the federal government also loses money because of the illegal trade, newspaper La Nacion reported Jan. 21. Lost tax revenue from illegal soybean seed sales now totals an estimated $40 million a year.

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