It was the biggest birthday surprise that Patrick Holden had ever had. On the day he turned 49 last month, the head of Britain's organic farming movement - long derided by the food industry as a collection of cranks practising in "muck and magic" agriculture - found his leading opponents sitting figuratively at his gumbooted feet.

Hendrik Verfaillie, president of the GM giant Monsanto, and four of his most senior colleagues had asked to see the director of the small Bristol-based Soil Association in order to find out where his company had gone wrong. Goliath had come to learn from David; Mohammed had come to the compost-heap.

Contrary to some reports early last week, Monsanto did not offer a U-turn on planting genetically modified crops in Britain, though it did raise ideas for co-operating with organic farmers. The truth is both more complicated and more intriguing. For the world's leading biotech company was embarking - in four secret meetings with British environment and consumer organisations - on a unilateral peace process.

The next key encounter will come on Wednesday, when Mr Verfaillie's boss, Monsanto's chairman Bob Shapiro - the chief evangelist of GM foods - flies into Britain to address a Greenpeace conference. His speech will give an indication of how far Monsanto is really prepared to go and of how much what its executives learnt at the meetings has sunk into the corporate mind.

For, as The Independent on Sunday reported four weeks ago, anguished debate has been raging through the upper reaches of the St Louis-based multinational. Senior company sources say that a powerful group is wanting to stop trials of GM crops in the UK altogether while others, including Mr Shapiro, say they must continue.

Everyone agrees that the company has taken a terrible battering. Less than two years ago it seemed to be carrying everything before it. Its crops were rapidly spreading onto the world's fields and supermarket shelves, it was riding rough-shod over opponents, and it was enjoying the uncritical support of two of the world's most powerful Governments - those of Britain and the United States.

But now it is in full retreat, its products rejected, its share price well down, and even the American heartland that forms the foundation of its business is now increasingly at risk.

It seems to be able to do nothing right. Last week it announced that it had found plants that could make a green plastic to be put on compost- heaps to rot, only for environmentalists to accuse it of trying to spin its way out of trouble and to point out that genes from the new plants could spread to contaminate others.

Last month's meetings, held in London at the Dorchester Hotel, were arranged at Monsanto's request by the Environment Council, a body specialising in getting together opposing sides in fierce fights over green issues. Mr Verfaillie (whose official title is chief operating officer) was joined by Hugh Grant, co-president of the company's agricultural sector, Kate Fish, director of public policy for the whole company, and Charlotte Walliker, director of agriculture for Britain and Ireland. They met delegations from Friends of the Earth, English Nature and the Consumers' Association, as well as the Soil Association. Mr Holden, an adviser to the Prince of Wales, said that the Monsanto executives were clearly "personally affected" by what they had heard. He added: "They said they had never heard the arguments before."

Charles Secrett, executive director of Friends of the Earth, agrees: "There is no question that what we said came as a revelation to them," he said. "They were wanting to learn. They listened very carefully and asked intelligent questions. You could see closed minds beginning to open."

Tony Combes, Monsanto's director of corporate affairs in the UK, says that the company intends "to continue the dialogue". He adds: "We believe it is crucial to listen to public concerns about the introduction of this technology to the UK." Can this be the same company that built up a formidable reputation for threatening and bullying those who criticise it? What has humbled it? Answer: the long reach of the British housewife. For the seemingly unstoppable spread of GM foods has been forced into reverse by shoppers simply refusing to buy them. In just three years, until this spring, the proportion of supermarket products containing GM ingredients - mainly soya - had soared from zero to 60 per cent. Now they are being swept off the shelves again.

The crucial point was the last week in April when Unilever, Nestle and Cadbury all announced that they were phasing out GM products in the face of customer resistance. Tesco and the Co-op did the same, joining the other big supermarket chains. As The Independent on Sunday predicted at the time, non-GM soya and other cereals suddenly became valuable commodities as the big companies started scouring the world for them so as to fulfil their pledges. The same sort of thing has been happening all over Europe and in Japan, which is expected to buy twice as many non-GM soya beans this year as last. Japan and Europe between them buy about a fifth of the United States crop, and so the relentless logic of market forces is beginning to force a green revolution across the Atlantic as well.

Conventional cereals are now commanding a higher price than GM ones. Suddenly US food processors who had long insisted that it was impossible to separate GM and non-GM cereals found that they could do so, and simple tests are being developed to distinguish between them. Some stores are even saying they will accept only conventional cereals and are advising farmers not to plant GM ones.

Market analysts are predicting that "a two-tier market" will develop, with the price of GM material "collapsing". This is beginning to force a rethink by US farmers who until now have embraced GM crops enthusiastically: half of all the soya and over a third of the maize grown in the country has now been genetically engineered. Iowa farmer Ed Wiederstein says: "If nobody wants it, I'll definitely change. There's going to be a real scramble if that occurs."

There are also signs that American public opinion, which has long accepted GM crops, is beginning to turn against them, facing Monsanto with the prospect of losing not just their European and Japanese markets but the home one that it has long been able to take for granted.

The catalyst was the finding, reported this summer, that caterpillars of the beautiful and much-loved monarch butterfly - described by the Washington Post as the "Bambi of the insect world" - can be poisoned by GM maize. Protests against GM crops have begun (there was one last week at the homely Hoe Down Harvest Festival in Guinda, California), and crop destructions by activists - common here but previously unknown in the US - have begun to erupt all over the country in the last three months. "The fire-storm of controversy in Europe has spread around the world and its sparks have landed in the US," says Sano Shimada, president of the Bioscience Securities in California.

Worst still for Monsanto and other giant biotech and seed companies, a series of lawsuits is about to be filed by US environmentalists and farmers in 30 countries, accusing them of trying to get a stranglehold on the agricultural market.

In the face of all this, Monsanto's share price has fallen and the Deutsche Bank, Europe's largest, predicts that GM interests, once seen as making a "bull case" for a company's shares, "will now be perceived as a pariah". No wonder Monsanto's key executives have suddenly discovered an urgent need to listen humbly to their opponents. They have been the victims of the most crushing exercise of consumer power ever seen. As Patrick Holden says: "This shows that informed public opinion is still more powerful than giant corporations backed by some of the most potent governments on earth."

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