Booming soy exports may be a boon to Argentina's convalescent economy, but Monsanto has stopped selling its Roundup Ready soybean seeds because a sharp rise in black-market sales of genetically modified seeds has badly cut into the company's revenue.
Argentina, the world's third-largest soybean producer, exported nearly 25 million tons of soy meal and oil last year. The nearly $5.5 billion earned from soy exports in the first three quarters of last year gave the economy a much-needed lift as it gradually recovers from a four-year recession that led to a default and a currency devaluation in 2002.
Land planted in soy has tripled over the last decade to nearly 32 million acres in 2003, spurred partly by the huge productivity gains farmers have made by using seeds genetically modified by Monsanto to resist its Roundup Ready herbicide.
But instead of buying seeds from Monsanto each year, farmers can cull seeds from their crop and save them for replanting, without harming harvest yields. Monsanto, based in St. Louis, estimated that more than half the transgenic seeds planted in Argentina in the October-November planting season were bought on the parallel market, compared with a fifth three years ago.
Some analysts say the rapidly growing black-market trade - oddly enough, called "bolsa blanca," which in Spanish can mean either "white market" or "white bag," for the white, unlabeled sacks farmers stash culled seeds in - has pared Monsanto's Argentine revenues from $580 million in 2001 to $300 million in 2002.
Although the company, which does not break out sales figures for Argentina, says such claims are exaggerated, its executives acknowledge that the damage is severe.
"It has come to the point where it is impossible even to cover our costs," said Federico Ovejero, a Monsanto official in Argentina, explaining the decision to suspend sales and research and development in the country.
Monsanto could resume selling soybean seeds, he said, if the government ensured renewed enforcement of the law, guaranteeing "a fair return" for seed producers.
Soy-related products accounted for 15 to 18 percent of Monsanto's sales in Argentina last year, but analysts said the company's soy business would double in value if farmers did not use culled seeds.
At the root of the problem is the abolition in November 2000 of the National Seed Institute by the administration of Fernando de la Ra, who was president then. Mr. de la Ra's government promised to cut bureaucracy and corruption by closing what it considered to be one superfluous institution every month.
"The only problem was that they only got round to abolishing one, the seed institute, which in fact was quite an efficient organization that did a reasonable job in policing regulations" on planting, Mr. Ovejero said.
Moving to placate vexed seed companies, President Nstor Kirchner's government reopened the institute last month, but details of how it will watch over farmland spread over such a huge country are unclear.
Monsanto's move is widely seen as an attempt to squeeze the government into strengthening seed legislation that is before Congress or at least to enhance enforcement of existing law.
In the past, farmers have been able to cull seeds by exploiting a loophole in legislation intended to protect small farmers. The government has said that it intends to tighten that loophole.
With Monsanto out of the game, just three major companies - Nidera Handelscompagnie B.V. of the Netherlands and Asociados Don Mario and Relm, both of Argentina - control the Argentine soy seed market, yet all must pay royalties to Monsanto if they sell soy resistant to Roundup Ready.
According to Francisco Firpo, director of Nidera Semillas, the Dutch company's Argentine unit, Monsanto's refusal to invest further in developing seeds for Argentina's climate and soil could mean long-term productivity losses for farmers.
That, in turn, could mean that farmers may become more willing to respect tighter regulations once the government seed agency is operating at full strength again.
"Argentine farmers are extremely receptive to new technology and know how to value the payback it brings," Mr. Firpo said.