Monsanto’s Business Troubles

The Twittersphere and anti-biotech blogosphere have recently seen a flurry of joyful announcements of financial trouble at biotech giant Monsanto. Rumours of the companies death are, as they say, greatly exaggerated, but it is true that the company has suffered a bit of a downturn.

For a journalistic take, see this story by Andrew Pollack, for the NYT: Monsanto’s Fortunes Turn Sour

As recently as late December, Monsanto was named “company of the year” by Forbes magazine. Last week, the company earned a different accolade from Jim Cramer, the television stock market commentator. “This may be the worst stock of 2010,” he proclaimed.

Monsanto, the giant of agricultural biotechnology, has been buffeted by setbacks this year that have prompted analysts to question whether its winning streak from creating ever more expensive genetically engineered crops is coming to an end.

The company’s stock, which rose steadily over several years to peak at around $145 a share in mid-2008, closed Monday at $47.77, having fallen about 42 percent since the beginning of the year….

The problem, very roughly, is that some of Monsanto’s (genetically-modified) seeds have underperformed, and failed to meet the expectations of their customers — i.e., farmers. According to a company VP cited in the NYT story:

“Farmers clearly gave us some feedback that we have made adjustments from.”

I’m no expert on the seed industry, but that quote — and the idea of a biotech company needing to make immediate adjustments based on customer feedback — really gave me pause. The time-lines for getting a new genetic manipulation to market are relatively long. (Can anyone give me a specific time-line?) In most industries, consumers give feedback and expect improvements soon. What are the consequences of that mismatch between the long time-lines of scientific research, the short-term expectations of customers, and the perhaps even shorter-term expectations of investors?

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(See also: Monsanto’s Business Model: Ethically Less than the Sum of its Parts)

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About Chris MacDonald

I'm a philosopher who teaches at Ryerson University's Ted Rogers School of Management in Toronto, Canada. Most of my scholarly research is on business ethics and healthcare ethics.
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