By Jack Kaskey - Dec 2, 2011 4:31 PM ET .
Monsanto Co. (MON) corn that’s genetically engineered to kill insects may be losing its effectiveness against rootworms in four states, the U.S. Environmental Protection Agency said.
Rootworms in Iowa, Illinois, Minnesota and Nebraska are suspected of developing tolerance to the plants’ insecticide, based on documented cases of severe crop damage and reports from entomologists, the EPA said in a memo dated Nov. 22 and posted Nov. 30 on a government website. Monsanto’s program for monitoring suspected cases of resistance is “inadequate,” the EPA said.
“Resistance is suspected in at least some portions of four states in which ‘unexpected damage’ reports originated,” the EPA said in the memo, which reviewed damage reports.
The insects, which begin life as root-chewing grubs before developing into adult beetles, are among the most destructive corn pests, costing U.S. farmers about $1 billion a year in damages and chemical pesticides, according to the U.S. Department of Agriculture.
Monsanto fell 3.8 percent to $70.42 at the close in New York, the tenth-biggest (SPX) decline among companies in the Standard & Poor’s 500 Index.
“The stock is always going to be susceptible to headline risk as it pertains to the effectiveness of their products,” Mark Demos, a portfolio manager who helps oversee $18 billion at Fifth Third Asset Management in Minneapolis, said by telephone. “They are leading the charge in biotech, so it’s bad for the whole industry.”
Introduced in 2003
Monsanto, the world’s largest seed company, introduced its rootworm-killing corn technology in 2003. The modified corn was planted on more than 37 million acres this year, Lee Quarles, a spokesman for St. Louis-based Monsanto, said yesterday. Monsanto isn’t having resistance issues with seeds engineered to kill corn borers and other pests that live above ground. Corn is Monsanto’s largest business, accounting for 41 percent of its $11.8 billion of sales in the fiscal year ended Aug. 31.
An Iowa State University study said in July that some rootworms have evolved resistance to an insect-killing protein derived from Bacillus thuringiensis, or Bt, a natural insecticide engineered into Monsanto corn. Entomologists in Illinois and other Midwestern states are studying possible resistance where the insects devour roots of Monsanto’s Bt corn.
Monsanto continues to believe there’s no scientific confirmation of resistance to its Bt corn, Quarles said by telephone. Still, Monsanto takes the EPA report “seriously” and is increasing efforts to teach farmers how to respond to unexpected damage in their fields, he said.
Less than 0.2 percent of the acres planted with Monsanto’s Bt corn were affected by unexpected rootworm damage this year, Quarles said. Farmers with root damage in their fields should consider changing practices to “stay ahead of this insect,” Monsanto said in a statement. That could include rotating corn with soybeans or using a product such as Monsanto’s SmartStax corn, which kills rootworms with two types of Bt, the company said.
The EPA report “does throw a harsher light on the longer- term efficacy of the trait,” Chris Shaw, a New York-based analyst at Monness Crespi Hardt & Co., said today by telephone. The development of SmartStax shows Monsanto knows it can’t rely on a single gene to address farmers’ problems, he said.
The agency said in the memo that SmartStax could lose its effectiveness if it’s planted in fields where bugs have developed a tolerance to Monsanto’s Bt gene, known as CRY3bB1. That’s because SmartStax’s effectiveness is predicated on both types of Bt working as designed. SmartStax corn produces the second type of Bt, called Cry34/35, with a gene licensed from Dow Chemical Co. (DOW)
To deter resistance to all types of Bt corn, the EPA requires farmers who use the modified crop to also plant corn that doesn’t produce the pesticide. The agency reasons that bugs in the so-called refuge that are not exposed to the toxin will mate with any resistant rootworms, creating a new generation of insects that are once again susceptible to the insecticide.
Some corn farmers don’t appear to be planting the required refuges in Minnesota, where moderate to severe rootworm damage is spreading and occurred for a third straight year in 2011, according to the EPA.
The EPA’s decision earlier this week to extend the registration of SmartStax, which was originally approved in 2009, shows that the resistance concern “isn’t significantly important,” Mark Gulley, a New York-based analyst at Ticonderoga Securities, said in a phone interview today.
Monsanto should enact a remedial action plan in fields where resistance to its Bt insecticide is suspected, the EPA said. That includes having growers use conventional pesticide to kill adult rootworm beetles late in the season and alternate pest control methods in the following season.
Monsanto tested rootworms for resistance in Nebraska, Illinois and Iowa and should expand the monitoring to Colorado, Minnesota, South Dakota and western Wisconsin because questions about the performance of Bt corn extends to all seven states, the EPA said in the memo.
Monsanto’s most advanced resistance problem is with crops engineered to tolerate its Roundup herbicide. Weeds that are no longer killed by Roundup have invaded 14 million acres of U.S. cotton, soybean and corn, according to Syngenta AG (SYNN), a Swiss chemical maker. A Dow Chemical Co. study this year found as many as 20 million acres of corn and soybeans may be infested.
To contact the reporter on this story: Jack Kaskey in Houston at firstname.lastname@example.org