By Randall Osborne


Just when it seemed agricultural biotechnology "ag biotech" had become a field in which investors could sow money and reap at least modest benefits without the big risks that come with drug development, the furor over genetically modified organisms (GMOs) in crops came to America.

Ag biotech has become a tougher row to hoe.

"The snowball started rolling down hill furiously last year, and from a global perspective, it's still rolling, and getting bigger and bigger," said Sano Shimoda, analyst, investment banker and president of BioScience Securities Inc., founded in 1993 to focus on ag biotech.

"It would be very difficult to persuade investors that this is the time to buy [ag biotech stocks]," he said. "This is going to get worse before it gets better."

Activists in food-conscious Europe had been fighting them for years, with the "green" movement staging demonstrations and floating political candidates on a platform that opposed the experimental farming of such ag biotech giants as Monsanto Co.

"Europe has said no in capital letters and neon lights," Shimoda said.

Europeans want to keep their cuisine holy. Just as much, maybe, the ag biotech protestors there are pushing to keep what they imagine as sinister life forms devised in test tubes by the likes of Monsanto from spreading rampant across the plains and wreaking environmental havoc.

Now, the conflict over GMOs has turned into a new kind of world war.

Despite the noise made by such high-profile skeptics as Jeremy Rifkin in the U.S., the general public at first took ag biotech in stride. To the extent they thought about it at all, they seemed to view the research as nothing more than an effort to find some way of growing more corn that bugs won't eat before it can be harvested. Science had come to the rescue, once again.

If anything, ag biotech sounded like a good thing, citizens seemed to believe. Researchers said their approach could increase crop yields, providing cost relief for growers, and thus could lead to a price break for consumers, not to mention opening the door to a potential way of feeding the children who starve in less-prosperous nations.

And they said it was a better-tasting tomato, too.

But a creeping suspicion about GMOs lately has turned to outright dismay, enhanced by the public's wary regard for corporate practices. These days, more and more Americans feel unsure about ag biotech.

Late last year, the two largest natural food store chains Whole Foods and Wild Oats Markets said they would not use genetically altered ingredients in their private label products. The chains together have more than 200 stores and about 1,300 products under their brand names.

As the protest movement here continues to swell, the National Research Council (NRC) and the House Science Committee's Subcommittee on Basic Research have issued reports that strongly back the safety of GMOs.

For companies active in ag biotech and their investors, the news looks good but Shimoda said the GMO storm is far from over.

"People expect to hear everything is wonderful now," he said. "I don't believe that."

Perry Adkisson, chairperson of the NRC panel, said the group "is not aware of any evidence suggesting that foods on the market today are unsafe to eat as a result of genetic modification."

Examiners "found no strict distinction between the health and environmental risks posed by plants modified through modern genetic engineering techniques and those modified by conventional breeding practices," said Adkisson, chancellor emeritus and professor emeritus at Texas A&M University.

"In other words, the breeding process is not the issue; it is the product that should be the focal point of regulation and public scrutiny," he said. "That is, just because a plant is transgenic, doesn't make it dangerous."

Wholly funded by the NRC, the study of transgenic, pest-protected plants took a year to finish. Under scrutiny were "plants whose genes have been modified through modern genetic engineering techniques, such as recombinant DNA technology, to express traits that make them resistant to certain pests and disease," Adkisson said.

"These transgenic plants may include genes from distantly related species or even from different biological kingdoms," he said. "We did not look at plants genetically engineered for other purposes, such as to resist herbicides, or plants bred by other methods, although many of our findings apply to other categories of plants."

Adkisson said the panel took a conservative approach and "placed more emphasis on potential risks of transgenic pest-protected plants than on potential benefits," but did not take on the philosophical and social issues.

No allergic reactions have taken place from a transgenic plant on the market. But potential allergens must be identified as transgenic plants are developed, the NRC said; in one research study, subjects with a known allergy to Brazil nuts reacted to a skin prick with a soybean solution that contained the Brazil nut gene.

Regulatory agencies should keep a database with information regarding levels of toxic compounds in transgenic plants, the panel added.

What about environmental dangers? The NRC said it "looked at the possibility that transgenic plants could inadvertently affect other organisms, for example, beneficial insects. As it turns out, both conventionally bred and transgenic pest-protected crops could impact these so-called non-target species, but the impact is likely to be smaller than that from chemical pesticides."

In some areas, "pest-protected crops could [even] lead to greater biodiversity" when used instead of chemicals.

But, on some subjects that have been much in the media, the NRC simply called for more study. Among these was the report of monarch butterflies being affected by genetically engineered corn. Experimenters found that pollen from corn grown to produce Bt toxins as insecticide slowed the growth of monarch larvae and sometimes killed them when the pollen was fed to them on milkweed leaves.

Other scientists, however, believe pollen density might not be great enough in natural conditions to threaten the butterflies.

"This is a prime example of an issue that needs to be researched further, with rigorous field evaluations," the NRC said.

That point also was made about the potential for pest-resistant genes passing from crops to weeds, making the weeds flourish. This could pose a high cost for farmers and threaten the ecosystem," the NRC said. "We recommend further research . . . "

And the panel said the same thing, yet again, about the possibility that pests could evolve in forms that resist plants genetically modified to kill them. "Such resistance could result in a number of potential environmental and health consequences," the NRC said, urging "more targeted research."

Another endorsement for ag biotech came last week, when the House panel capping several hearings on ag biotech issues said it found no unusual risks in genetically modified crops.

Rep. Nick Smith (R-Mich.), chairperson, delivered his report, called "Seeds of Opportunity: An Assessment of the Benefits, Safety, and Oversight of Plant Genomics and Agricultural Biotechnology," which found ag biotech could deliver more nutritious foods that are less allergenic than classical methods. No scientific justification exists for labeling such foods, the report adds.

Further, the report said Bt toxins do not significantly threaten monarch butterflies.

Shimoda said neither of the comforting reports will affect much, at least not right away.

"You can say over and over, 'The science is safe,' and Rome is going to continue to burn," he told Financial Watch.

"The real issue for ag biotech is that it serves a global marketplace," he said. "Although those reports are very important, from a real pragmatic standpoint, the global concerns about GMOs will call the shots in the short to intermediate term."

Ag biotech's market "will be flat to downish for the next one or two years," Shimoda said, and leaders such as Monsanto, DuPont, Novartis AG and AstraZeneca plc will be the most affected.

Recovery will happen, but not until 2002 or after, he said.

"It's going to be a slow battle to get back to where we started, a year and a half ago, before the GMO situation," Shimoda said. "But, over the next 12 months, there's going to be substantive opportunity for those investors who want to look another two years out."

Meanwhile, he said, "forget about what the truth is. This is battling for sound bites. I don't want to minimize the monarch butterfly, but this is perception. It's spin."

Europe, Shimoda said, will remain "isolated" in its opinions on GMOs.

"They have different views of the world," he said. "The Pacific Rim is most important a very large consumer of American export agricultural products." Attitudes there are varied, and likely to change eventually for the better.

"Pre-1996, nobody believed in ag biotech," Shimoda said. "In 1996 to 1998, some products came to market, and it was real. Then, all of a sudden, we had the GMO situation. The ag biotech premiums have largely fallen out. Monsanto is in the lead, obviously, and has been vilified."

Media campaigns have been launched in a bid to alter public ideas about ag biotech, but the better fix is simply the passage of time, which will bring the gradual return of consumer confidence and a stronger market for investors, Shimoda said.

"We've gone from euphoria to depression, but the concerns will slowly evaporate," he said. "Expectations are going to rise again."