{"id":26867,"date":"2017-11-15T22:57:50","date_gmt":"2017-11-16T03:57:50","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/monsantos-battle-for-the-future-of-farming\/"},"modified":"2017-11-15T23:41:54","modified_gmt":"2017-11-16T04:41:54","slug":"monsantos-battle-for-the-future-of-farming","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/monsantos-battle-for-the-future-of-farming\/","title":{"rendered":"Monsanto\u2019s Battle for the Future of Farming"},"content":{"rendered":"

As the leading producer of seeds and agrochemicals globally, climate change is a crucial concern for agricultural giant Monsanto. First, reductions in the volume of arable land and the available water supply are projected to depress global food production, reducing the potential market for Monsanto\u2019s products. In the U.S., crop yields and farm profits are expected to decline by the mid-twenty-first century due to heat and precipitation extremes1,2,3<\/sup> and in India every one degree Celsius increase is expected to decrease yields of wheat by 5-10%.3<\/sup> Second, fluctuating weather patterns \u2013 including droughts, floods, extreme heat, and severe weather events \u2013 are causing variability in crop yields and agricultural commodity prices for farmers using Monsanto products worldwide. In the U.S., recent evidence indicates that climate change increases volatility in year-to-year corn prices.5<\/sup> This could drive uncertainty in customers\u2019 demand for Monsanto\u2019s seeds and agrochemicals.<\/p>\n

Monsanto, which earned USD $13.5B in revenues in 2016,6<\/sup> has attempted to help farmers adapt to decreasing water resources by introducing drought resistant seeds. Building on their capability to genetically modify plants to withstand pests, Monsanto introduced DroughtGuard<\/em> seeds to farmers in the U.S. and China in 2013.<\/a>7,8<\/sup> \u00a0<\/sup>However, although there may be long term potential for this biotechnology, scientists find that the seeds provide only modest improvement, if any, over classical breeding \u2013 a potential one percent increase in corn productivity in the U.S. \u2013 and do not provide benefits during severe or extreme droughts.<\/a>9<\/sup> Potentially more interesting is Monsanto\u2019s 2013 acquisition of Climate Corp for $930M. Founded by an ex-Google employee to help farmers adapt to extreme weather patterns caused by climate change, Climate Corp uses analytics to predict acre-by-acre weather and its effects on crop yields across the U.S. Additionally, it offers direct-to-farmer, automated weather insurance policies: when the weather exceeds the policy guardrails, farmers get a check.<\/p>\n

Longer term, Monsanto has committed to leading the way in corporate efforts to mitigate and adapt to climate change, publicly committing to becoming a carbon neutral corporation. However, the company cannot seem to shake doubts from the public about the sincerity of its motivations for profit vs. purpose. It remains to be seen how much the firm\u2019s brand is tied up in ongoing scandals over glyosphate fertilizer and possible carcinogenic properites, and illegal pesticide spraying by farmers on fields planted with Monsanto soybeans.<\/p>\n

A savvy move for Monsanto would be to shift their business efforts, which are focused mainly on climate change adaptation, to higher profile and impactful projects on mitigation, while phasing out less environmentally friendly business lines. \u00a0For example, research indicates that chemicals intended to be used alongside Monsanto\u2019s genetically modified seeds reduce soil sequestration \u2013 in other words, reduce the ability of soil to act as a carbon sink, and result in emitting carbon into the atmosphere. Marketing these chemical products undermines Monsanto\u2019s policy and regulatory credibility to fast-track approvals for environmentally friendly seeds.10,11<\/sup> The Series B investment by Monsanto Ventures into Blue River, which focuses on using data to reduce the use of chemical pesticides by targeting them to limited areas, was a move in the right direction.12<\/sup> Another way to further this effort would be R&D on new ways to grow or produce food with lower carbon output, or target crops to areas with highest yield globally based on analytics and sell this data to farmers. A further investment area could involve monetizing some of their work in CSR to increase global carbon sinks, e.g. conservation of trees and increased carbon sequestration in soil. However, hanging over Monsanto\u2019s head for the past year has been a pending deal by pesticides and pharma firm Bayer to acquire Monsanto for $66B.13 \u00a0<\/sup>To the public, this results in a \u201cmixed signals\u201d that Monsanto is hedging on their future.<\/p>\n

Key questions to evaluation going forward will be:<\/p>\n