Monsanto Gets Good News, Genetically Engineered Seeds Are Safe

May 21, 2016 by Paul Ausick

A day before Monsanto Co. (NYSE: MON) confirmed that it was holding discussions with Bayer regarding an acquisition by the German company, the National Academies of Sciences, Engineering and Medicine released a report stating that genetically modified (GMO) foods are safe for people and do not harm the environment.

Monsanto is the world’s leader in seed sales and the leader in sales of GMO seeds, so this is particularly good news for the company as it negotiates a sale. A combination of Bayer and Monsanto would easily be the largest seed supplier in the world, with Monsanto’s leading position in North America and Bayer’s leading position in Europe and Asia, creating a giant with about 30% of the world’s seed market.

Bayer’s shareholders have expressed their lack of enthusiasm for the deal by knocking the stock price down about 8%. If the deal were to be completed, Bayer would inherit a host of troubles from individuals and groups opposed to the use of GMO foods. The list of opponents is a long one and begins with the state of Vermont, with its legislation to require GMO foods to be labeled as such, a requirement the seed industry, and especially Monsanto, vehemently oppose.

The report from the National Academies reviewed nearly 900 research and other publications and held public meetings and webinars while preparing its study. The group looked for “persuasive evidence” that GMO foods caused health problems to consumers, and it found none.

The group also searched for evidence that insect- or herbicide-resistant crops reduced the overall diversity of plant and insect life on farms and found no “conclusive evidence” of a connection between GMO crops and environmental problems.

The National Academies also noted that existing evidence indicates that GMO crops of soybeans, cotton and maize (corn) have “generally had favorable economic outcomes for producers” who grow these crops.

The U.S. Department of Agriculture, the World Health Organization, and the European Commission have all also concluded that GMO foods are as safe as foods grown from conventional seeds

Critics, however, contend that the long-term effects on both health and the environment have not been subjected to the kinds of long-term studies that may reveal cause-and-effect relationships.

India and Argentina are pushing back against permitting the use of Monsanto’s GMO seeds, and even U.S. agricultural giants Archer Daniels Midland Co. (NYSE: ADM) and Bunge Ltd. (NYSE: BG) have declined to buy new soybean seeds from Monsanto because the seeds have not yet been approved in Europe where many of their exports are directed.

Rising crop yields over the past several years have put downward pressure on farm prices, and this low-price environment is the driving force behind agribusiness consolidation. ChemChina recently struck a deal to buy Syngenta A.G. (NYSE: SYT) after Monsanto tried for years to acquire the German firm. The Dow Chemical Co. (NYSE: DOW) merger with E.I. du Pont de Nemours & Co. (NYSE: DD) would create the world’s largest seed business, unless and until Monsanto and Bayer can get a deal done.

There are only three large players left: Bayer, Monsanto and BASF. A counterbid from BASF is unlikely, but in a do-or-die situation, anything’s possible.

The report from the National Academies is good news for Monsanto and Bayer, but it really doesn’t offer anything new except to underline previous reports that have declared GMO foods to be safe. The critics of GMO foods won’t be placated by the new report, but barring some startling new revelation, their case is getting weaker.