June 28, 2013

Royalty for New Intacta Soybeans not Yet Known

Author: Michael Cordonnier/Soybean & Corn Advisor, Inc.

After China gave its approval for the importation of Intacta RR2 soybeans in early June, Monsanto has decided to start marketing the new soybeans in Brazil in time to plant the 2013/14 crop starting in September. Monsanto has not yet announced how much royalty will be charged for the new soybeans, but analysts had estimated earlier that it might be in the range of R$ 115 per hectare (approximately US$ 22 per acre at today's exchange rate).

The new soybeans have been developed to resist insect feeding by using the Bt gene technology which has been used in corn for many years. The technology was approved in Brazil in 2010, but the company decided to keep the soybeans off the market until the number one user of Brazilian soybeans, which is China, gave its approval.

With the amount of seed that is available, it is estimated that up to 9% of Brazil's 2013/14 soybean crop could be planted with the new soybeans. The Intacta RR2 soybeans have the potential to increase productivity by up to 10% and the Association of Soybean Producers in Brazil feels that the use of the new soybeans will gradually increase over the next few growing seasons as long as the royalties are not excessive. A 10% increase in productivity is not guaranteed with the new soybeans because the yields are determined by many things such as weather and diseases, not just reduced insect pressures.

In extensive testing in Brazil, the technology worked very well and farmers were able to greatly reduce their applications of insecticides in order to control insect feeding. This will be particularly important for producers in northeastern Brazil where an infestation of corn ear worm significantly reduced soybeans yields in 2012/13.

Farmers in Brazil are not allowed to start planting their soybeans until September 15th, which is the end of the 90-day soybean free period in most of Brazil. During the soybean free period farmers are required to eliminate any volunteer soybeans that may have germinated in their fields, along the roadways, or around storage facilities. The prohibition is a way to slow the spread of soybean rust from one growing season to the next.

If a farmer does not make a good faith effort to eliminate the volunteer soybeans he could face a fine in the range of R$ 220 to R$ 12,000 depending on the severity of the situation. For egregious offenders, a producer may even be prohibited from obtaining production loans from the federal government.