Tuesday, August 25, 2009

Monsanto anti-trust target - indicators mount

Exclusive: Indicators mount that Monsanto will be anti-trust target - Stock Analysts takes note
Democratic Underground, 21 August 2009

Yesterday it was noted that a major yet unreported story was developing that indicated that the Department of Justice and the Department of Agriculture were signalling a significant departure from Bush anti-trust guidelines and that the Obama administration reported that they were going to conduct workshops to investigate anti-trust monopolies in agriculture by mega agriculture conglomerates. (See thread: http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=132x8602763)

Further research indicates that Monsanto is the most obvious initial target of anti-trust research.

These moves have gone unreported in the media and the blogosphere beyond DU, but today at least two stock analysts connected the same dots noted yesterday and asked if Monsanto was being prepared to be "thrown under the anti-trust bus"

Is Monsanto Being Thrown Under the Anti-Trust Bus?

In July 2008, the OCM started the Crop Seed Concentration Project an initiative target specifically at Monsanto, which the group says controls 90% of the market for genetically modified seed, a figure Monsanto disputes.

"Monsanto's effort to enforce licensing agreements and protect its patent rights has dramatically altered American agriculture," the OCM (Organization for Competitive Markets) says on its Web site. "Monsanto has filed more than 100 patent infringement lawsuits against U.S. farmers."

The OCD's crop concentration campaign coincides with U.S. President Barack Obama's vow to enforce antitrust laws that were neglected by the Bush administration, and its national convention attracted the representatives from the Federal Trade Commission, the Department of Justice, and the Commodity Futures Trading Commission.

Monsanto Chairman and Chief Executive Officer Hugh Grant has a great deal to be worried about.

If you connect the dots it shows that powerful forces are lining up to take aim against Monsanto's market domination of the seed market. There are two other political reasons that the Monsanto CEO should also begin to worry:

1) The Attorney General's office inherited a number of complex legal positions that it doesn't agree with and may feel constrained to take immediate action on. Certainly the AG's office would be delighted to find some area that they can demonstrate a significant and radical change from the previous administration and show results. The AG's office has announced that it has officially "withdrawn Bush administration guidelines" on agricultural anti-trust.

2) It is a political win-win-win for the administration to pursue anti-trust against agricultural mega companies. It helps the administration build political favor in Republican areas. The fact that Monsanto is filing hundreds of lawsuits against ordinary farmers has sealed the politcal test on the issue. It also plays well to the more liberal Democratic base and it will be welcomed by consumers who will benefit from honest competition.

To understand what has happened connect these dots:

1.Monsanto projects monopoly like market projections for future profits.

Monsanto has a dominant position in the market and is now projecting huge increases in revenue (not something anti-trust investigators will have much sympathy for. Monsanto is projecting a 250% increase in gross profit from 2007 to 2012)

By 2012, Monsanto expects its gross profit from its core seeds and traits business to be between $7.3 billion and $7.5 billion - about 2.5 times its 2007 level.

2.Organization for Competitive Markets - (appears to be the leading think tank to fight big AG monopoly) launches the Seed Concentration Project in July 2008 specifically to fight Monsanto's monopoly of the seed market.

The problem of consolidation in the seed industry is well known. One company in particular, the Monsanto Company, controls a high percentage of the global seed market and continues to increase its dominance by acquiring or merging with a significant number of companies in its industry. Monsanto has acquired dozens of independent seed companies in the last decade. It controls 70% of the transgenic corn market and more than 90% of the transgenic soybean market.

In 2007, Monsanto acquired Delta and Pine Land, the nation's largest cotton seed company. OCM opposed this acquisition, as did several other farm organizations and 13 state attorneys general. Monsanto now controls about 90% of the cotton seed and cotton seed traits marketplace.

3.Monsanto sues farmers for patent lawsuits

Monsanto's effort to enforce licensing agreements and protect its patent rights has dramatically altered American agriculture. Monsanto has filed more than 100 patent infringement lawsuits against U.S. farmers. Sometimes the farmers and businesses it targets are completely innocent. Yet these farmers undergo undue financial and emotional stress in their effort to avoid costly lawsuits.

4.Monsanto sues Dupont

NEW YORK (Reuters) - Monsanto Co, the world's biggest seed company, said on Tuesday it sued chemical maker DuPont for unlawful use of its proprietary Roundup Ready herbicide tolerant technologies in soybeans and corn.

DuPont responded by accusing Monsanto of trying to deny access to alternative technologies at a time when farmers are struggling with weeds that are increasingly resistant to current Monsanto products.

"We are disappointed Monsanto chose litigation and inflammatory public statements over civil discourse," James Borel, a DuPont group vice president, said in a statement.

Monsanto said its suit was filed on Monday in federal court in St Louis against DuPont and its subsidiary, Pioneer Hi-Bred International, Inc.

5.Dupont and OCM join forces

It's likely that by "masked third parties" Grant meant the Organization for Competitive (OCM) Markets, a nonprofit group that claims Monsanto controls 90% of the market for genetically modified seed. The Lincoln, NE-based organization claims to take on big agricultural companies in defense of small farmers and consumers, but it was recently revealed DuPont gives the group financial support.

6.OCM conference on anti-trust agricultural practices attracts record attendance

The Organization for Competitive Markets (OCM) drew a record crowd of ranchers, farmers, feedlot operators, seed distributors and others for its annual conference held in St. Louis on August 7th. Attendees heard panel presentations concerning the ills of market concentration and anticompetitive practices and ongoing efforts to address these issues. Featured speakers included antitrust attorneys, food retail economists and two top Obama Administration officials tasked with enforcing antitrust and competition laws in the agriculture and livestock sectors.

7.Obama administration attends OCM conference and announces major policy change on Agriculture Anti-Trust and announces workshops to investigate impact on farmers and ranchers:

The Department of Justice and USDA are interested in receiving comments on the application of antitrust laws to monopsony and vertical integration in the agricultural sector, including the scope, functionality and limits of current or potential rules.

The Department and USDA are also inviting input on additional topics that might be discussed at the workshops, including the impact of agriculture concentration on food costs, the effect of agricultural regulatory statutes or other applicable laws and programs on competition, issues relating to patent and intellectual property affecting agricultural marketing or production, and market practices such as price spreads, forward contracts, packer ownership of livestock before slaughter, market transparency, and increasing retailer concentration.

8.Market analysts start to take note:

Money morning (quoted above)

CNBC Jim Cramer: Monsanto couldn't provoke a government inquiry anymore than it already has:

"The Obama administration is stepping up its antitrust enforcement, Cramer said Thursday, and Monsanto could be the first target. Recent moves by the company seem to be daring the Justice Department to file a suit.

Believe Cramer when he says that the government has a strong case against Monsanto. A series of competition-crushing acquisitions made this biotech disguised as an agriculture outfit the market leader in genetically modified US corn, soybean and cotton seeds. And Monsanto maintains strict agreements with its farmer clients that leave them virtually no choice but to feed at the corporate trough. Plus, the company plans to push through a 42% price increase on its new seeds, and there's nothing these farmers can do about it.

Monsanto couldn't provoke a government inquiry anymore than it already has. The firm seems to have farmers and the seed market in a stranglehold. Monsanto's reputation is so noteworthy that the company serves as the villain in the new documentary Food, Inc. Cramer thought the movie's accusations alone might be enough to draw Washington's ire."

The strangest part of this whole story is how it seems to be evolving completely outside of the mainstream media (only noted by agricultural and stock analysts so far) and outside of the blogosphere.

Connecting the dots outlined above seems to indicate that this is going to be the first major clash between the Obama administration and big agriculture.

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