Lord of the seeds

BUSINESS

Monsanto

Jan 27th 2005
From The Economist print edition

A good move to buy the world leader in vegetable seeds

MONSANTO, the world leader in genetically modified (GM) grains and oilseeds, is buying a second blade for its plough: California-based Seminis, the leader in vegetable seeds. Seminis made a small loss in 2003-04 and news of the $1.4 billion buy cut Monsanto's share price by 6%. But it may yet prove a smart move.

Seminis brings four benefits. One, a huge range of new crops—almost any vegetable you can name and some that you can't—to join Monsanto's maize, soya and others. Two, an extra $550m-a-year turnover as Monsanto's focus shifts from its $3.2 billion (but slow-growing) herbicide business into seeds and GM, whose $2.35 billion sales in its latest reported 12 months were 24% up on a year earlier. Three, a worldwide network, including a new operations centre in China and a two-year-old one in India, two huge potential markets. Four, a non-GM image.

Seminis was founded in 1994 by Alfonso Romo, a Mexican tycoon, as part of his Savia group. At the time he dreamed of GM, but Seminis made heavy losses, and in 2003 he sold to Fox Paine, an American private-equity firm that is now profitably selling out. Mr Romo's string of acquisitions created a firm that is widely (and wisely) decentralised. Much of its research and sales lies in Europe. Facing European fears and rules, however, Seminis has not tried to push GM there.

Indeed, it sells very little GM anywhere: its many new varieties arise from advanced use of the old technique of cross-pollination. The link with Monsanto, suggests Gillian Turco of Rabobank, a Dutch bank that specialises in agribusiness, might, paradoxically, be exactly what the GM cause needs. Biotechnology does not mean just GM. Give consumers something as unusual as Seminis's mini-watermelon, downsized—but not by GM—to suit one person, not eight, and they may realise they are already in the biotech era, and over time lose their fear of GM.

Well, perhaps, though enemies of GM argue persuasively that Europeans already know very well that their food results from cross-breeding, but still think GM a step too far. Monsanto itself says it will carry on with Seminis's traditional technology, though it might use GM in the longer term. GM farming is spreading rapidly outside Europe, but, given the hassle that Monsanto's present GM crops have met, that slow approach may be wise.

Copyright © 2005 The Economist Newspaper and The Economist Group. All rights reserved.