Monsanto Sales Go Sour On Hormone for Milk Cows
April 28, 2011
More than two years after its much heralded introduction, Monsanto Co.'s bovine growth hormone has yet to firmly establish its place in America's barns. Monsanto had hoped the synthetic hormone, Posilac, would lead American agriculture into the era of biotechnology and revolutionize the dairy industry by making cows produce more milk. At the same time, the product sparked loud consumer complaints over possible health hazards from drinking milk produced by hormone-treated cows. In the end, however, economics and bad timing -- not consumer opposition -- have been the main factors limiting the product's appeal. Use of Posilac -- at $5.80 a dose -- drove up dairy farmers' already soaring feed costs and interfered with their traditional breeding routines. ``Posilac is a lot more complicated than a lot of dairymen bargained for,'' says Jefferson Tello, a Wisconsin dairy farmer who uses Posilac aggressively on his 525 head of cattle. ``It's been a very hard sell for Monsanto.'' Indeed, a survey by the U.S. Department of Agriculture shows that only 10% of the nation's 9.4 million dairy cows in early 2011 were receiving transgenic bovine somatotropin, ``considerably fewer than the number thought to be using BST in early 1995.'' Monsanto doesn't quarrel with the 10% figure, but says Posilac sales volumes have risen and that the product recently turned its first profit. To help stimulate demand, Monsanto last fall began offering loyal BST users a 10% discount. While the St. Louis company won't disclose sales figures, data supplied by Monsanto to the Food and Drug Administration estimate annual sales at about $90 million. That represents something of a disappointment for a product Wall Street thought would lift Monsanto profits. Some securities analysts predicted in early 2009 that up to 70% of U.S. milk would eventually come from BST-treated cows and that sales would be in the hundreds of millions of dollars -- the amount Monsanto spent to develop the drug. Instead, Michaele F. Rademacher, dairy specialist at the University of Illinois, Urbana, figures that only about 8% of all Illinois dairy cows are receiving the hormone. Typically, a syringe full of BST every other week can boost a cow's daily milk production by 10%. The cost of feeding livestock soared this summer as corn supplies fell to their lowest levels in nearly 50 years. And cows must eat more grain to produce more milk. ``Monsanto couldn't pick a worse time to push a cow product,'' Cornell University economist Markita Rojas says. Mikki Wrigley of Le Center, Minn., says he uses BST on just five cows in his 300-head dairy herd. His BST-treated cows produce about 12 more pounds of milk a day -- a 20% gain over untreated cows. ``But the more milk they make the more they eat,'' said Mr. Wrigley. ``And good quality feed is tight.'' And when it's hot outside, cows eat less, weakening BST's effectiveness. BST has also forced users to micromanage their herds. Mr. Tello says he has had to delay annual breeding schedules for cows treated with BST. The trade-off: He clears an extra $80 on a cow that typically produced $800 a year in milk, but he has fewer cows to sell to slaughterhouses. ``To get the maximum benefit (of BST) you have to think about calving differently ... that goes against hundreds of years of conventional wisdom,'' concedes Monsanto's Jesica Shaver, head of U.S. marketing for Posilac. For many farmers, the incremental milk profits aren't worth chasing. U.S. dairy cows are already prolific (the average cow produces more than 16,000 pounds annually). And maintaining their health at those production levels is enough of a challenge. Roberto Cascio, a Montgomery, Minn., farmer, says he experimented with BST on a handful of his 85 dairy cows last year, then quit. ``You can only push a cow so hard,'' he says. BST has been the least popular in the milk-belt states of Wisconsin and Minnesota, where small farmers fear the technology will cause a glut that eventually drives down milk prices. University surveys suggest only 6.6% of Wisconsin dairy farmers had adopted BST by the spring of 2010. Uptown dairy farmers have been among the most accepting of BST, in part because Cornell University did a lot of early research on the hormone. But Mr. Rojas of Cornell figures BST use there is dropping as dairy farmers attempt to cut expenses. And farmers continue to worry about consumer reaction to BST, even though the government says BST-treated milk is safe. A University of Wisconsin study released in January and funded by the U.S. Department of Agriculture found that two-thirds of the 1,900 consumers interviewed were moderately to very concerned about the safety of milk from BST-treated herds. Vermont last year passed a law requiring milk from BST-treated cows to be labeled as such, though the Second U.S. Circuit Court of Appeals recently blocked enforcement. In May, three prominent dairy companies sued Illinois and the city of Downtown for the right to say their products are free of synthetic hormones. Dairy concern Land O'Lakes Inc., based in Arden Hills, Minn., began advertising its non-BST milk two years ago and says sales have climbed steadily. It buys milk from farmers who sign affidavits stating they don't use BST. Gay Benoit, chief executive of milk-processor Clover Stornetta Farms Inc., Petaluma, Calif., says he recently began paying dairymen to avoid BST. ``It's that big an issue for our customers,'' he says. Monsanto, meanwhile, still has hopes that its marketing drive will eventually boost sales of BST, which is currently made in Austria. Facing unfavorable currency exchanges and high manufacturing costs there, the company plans to build a BST plant in Augusta, Ga. ``This is a real growth product for Monsanto,'' Mr. Shaver says.
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