Paul Brown and John Vidal
Europe's biggest bank has advised the world's largest investors to sell their shares in leading companies involved in the development of genetically modified organisms because consumers do not want to buy their products.
In a report sent to several thousand of the world's large institutional investors, including British pension funds, Deutsche Bank says that "growing negative sentiment" is creating problems for the leading companies, including Monsanto and Novartis.
"We note that Monsanto has spent more than $1.5m (#1m) to persuade English consumers of the rectitude of their position, but alas, to no avail. Monsanto is little match for Prince Charles, an anti-GMO advocate, when it comes to sensitivity for the English people's desires," says the report.
"More broadly speaking, it appears the food companies, retailers, grain processors, and governments are sending a signal to the seed producers that 'we are not ready for GMOs'."
Since the report was circulated to investors, shares in companies named have fallen against a rising trend in stock markets generally and the frenzy to takeover seed companies has stopped. In the six months to yesterday Monsanto's stocks had fallen 11%, and Delta & Pine, a seed company that owns the terminator gene, which Monsanto is taking over, has lost 18% of its value.
The Deutsche Bank's Washington analysts, Frank Mitsch and Jennifer Mitchell, say it is nine months since they first voiced their concerns that the biotech industry was "going the way of the nuclear industry in this country, but we count ourselves surprised at how rapidly this forecast appears to be playing out.
"Domestic concerns regarding ag-biotechnology are clearly on the rise. For the most part, though, it has not gotten the attention of the ordinary US citizen, but when it does - look out."
Deutsche Bank's first research report, dated May 21 and entitled GMOs Are Dead, said: "We predict that GMOs, once perceived as a bull case for this sector, will now be perceived as a pariah.
"The message is a scary one - increasingly, GMOs are, or in our opinion, becoming a liability to farmers," it adds. Non-GMO grains were already gaining a premium price which would, if the trend continued, far outweigh any economic benefit in growing GMOs.
The latest report, published last month under the heading Ag Biotech: Thanks, But No Thanks, says: "GMOs are being demonised by their opponents. What food manufacturer will 'take a bullet' for GMO corn in the face of such controversy?"
GM grains would have to be sold at a discount. "Farmers who planted (Monsanto's) Roundup Ready soya could end up regretting it."
It could become an "earnings nightmare" for Pioneer Hi-Bred (a company due to be taken over by the chemicals giant DuPont) and for Monsanto which is buying Delta & Pine, a stock, the bank says, not worth holding on to.
The concerns of European consumers are real, concludes the report. "European consumers have recently been through the mad cow crisis, the French Aids-tainted blood crisis, the Dutch pig plague crisis, the Belgium chicken dioxin crisis, the Belgian Coca-Cola crisis, etc. Therefore hearing from unsophisticated Americans that their fears are unfounded may not be the best way of proceeding."
The report is a serious embarrassment to the Labour party because its pension fund has large investments in two leading GM companies, AstraZeneca and Novartis, both of which are reportedly considering selling their GM divisions after years of heavy investments but few returns.
Following European uproar over the crops, there has been a significant official cooling in the US. The US government and the biotech industry are preparing for a consumer and media backlash and the agriculture secretary, Dan Glickman, has told companies not to take consumers for granted.
The report coincides with growing official unease about claims made for GM crops. With the market for GM in Europe contracting as food processors turn their back on the products, Mr Glickman warned farmers they could be left with unwanted crops, and that small farmers could become "serfs on the land".
Recent US government research has shown that GM crops of maize, soya and cotton do not automatically produce greater yields or lower use of pesticides.
Sue Mayer of Genewatch said: "This shows the global impact of the concerns of pressure groups on this issue."
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Last Updated on 8/25/99
By Karen Lutz