Bayer's top seed faces U.S. soybean challenge from Corteva

Bayer AG’s takeover of Monsanto has been beset by problems, and now a decades-long dominance of the $4 billion U.S. soybean seed market is under threat from rival Corteva Inc.

Bayer (BAYGn.DE) told Reuters it expects plantings of its genetically modified Xtend soybean seeds to flatline this year for the first time, after three years of strong growth since their launch with an accompanying weed-killer. It projects plantings in 2020 will stay at about 50 million acres, which was 66% of the American crop last year.

Meanwhile Corteva (CTVA.N), formed last year from the agricultural units of Dow Chemical and DuPont, expects its Enlist E3 seed to make up 20% of the U.S. crop in 2020, the first year it has been widely available.

The shift in the industry landscape is being driven by farmers like Ron Heck, in Perry, Iowa, who is ditching Bayer’s product and plans to go all-in on Corteva’s new soybean this spring, planting it across 2,000 acres.

Seeds are genetically modified to resist certain types of weed-killers and farmers must use only those herbicides to avoid damaging their soybeans. The problem for Bayer is that a herbicide used for Xtend soybeans, dicamba, is known to drift away and damage crops that are unprotected.

“There’s a considerable drag on enthusiasm to plant dicamba beans, particularly when Enlist beans are available and those problems all go away,” Heck said.

Bayer is not standing still, though, and the stage is set for an escalating arms race in the seed market for soybeans, the most valuable U.S. agricultural export.

The German company is planning to launch Xtend’s next generation seed, XtendFlex, which can be used with an additional herbicide. Ryan Rubischko, who leads Bayer’s soybean portfolio, said it would be launched in limited quantities this year, pending regulatory approvals.

Drifting dicamba

Bayer, an agrichemicals and drugs titan, has been fighting costly lawsuits related to its $63 billion acquisition of American seed maker Monsanto in 2018.

Monsanto had dominated soybean sales since the 1990s with Roundup Ready, modified to withstand the weed-killer glyphosate. Some weeds have since developed resistance to glyphosate due to overuse, however, raising the need for soy that can resist alternative herbicides.

U.S. juries have separately ordered Bayer to pay billions of dollars over allegations glyphosate causes cancer, which the company denies.

Xtend soybeans were launched with the dicamba herbicide in 2017 when they were used on 20 million acres, or 22% of U.S. plantings. They quickly grew to cover 44 million acres in 2018, or 49% of plantings.

Bayer battles for U.S. soybean acres

Bayer expects its Xtend biotech soybean variety to be planted on about 50 million acres in 2020, unchanged from 2019, amid competition from rival Corteva's new Enlist soybeans. Xtend soybeans, designed to tolerate dicamba and glyphosate herbicides, were planted on just 1 million acres when they were introduced in 2016.

Note: Figures are in acres planted, 2020 figures represent forecast acreage
Source: Bayer, U.S. Department of Agriculture
Tom Polansek | REUTERS GRAPHICS

Now dicamba has also been engulfed by controversy, with a jury last month ordering Bayer and competitor BASF SE (BASFn.DE) to pay $265 million to a Missouri peach grower who said his orchard was destroyed by the companies’ dicamba drifting in from nearby farms. More than 2,000 U.S. farmers will likely sue the firms over crop damage linked to dicamba, according to law firm Peiffer Wolf Carr & Kane, which is representing some.

Bayer said the case had not hurt demand for Xtend soybeans and that it will appeal the jury’s decision.

Nonetheless, sales of Corteva’s new seeds are going strong, according to five U.S. dealers interviewed by Reuters. The five included Stine Seeds, one of the largest independent dealers, though they may not be representative of the whole market.

The dealers said Enlist accounted for 20% to 33% of their soybean sales for this spring, putting it on track to meet or top Corteva’s January estimate of 20%.

Enlist demand is eating into sales of Xtend as well as LibertyLink soybeans, developed by BASF and MS Technologies, they said. The heightened competition comes as the American soybean crop, worth $40 billion prior to the U.S.-China trade war, stands to become more lucrative as top importer China has pledged to increase purchases under an initial trade deal.

Bayer fights back

Stine Seeds said its total soybean seed sales were up 30% because of demand for Enlist.

Ralph Price, agronomy manager at Meadowland Farmers Coop in southwest Minnesota, said up to 30% of its soybeans sales were Enlist, “a pretty good first year” for the seed.

“When the Roundup Ready system came out, it was pretty similar and just mushroomed the following year,” he added.

Bayer is preparing its riposte, with XtendFlex, which will resist the glufosinate weed-killer, in addition to glyphosate and dicamba. The seeds could be planted on about 20 million acres come 2021, soybean portfolio leader Rubischko said in an interview.

XtendFlex will fight off 375 weeds, compared with 350 for Xtend and 260 for Enlist, according to Bayer. Subsequent generations will resist up to six herbicides, it said.

Enlist tolerates glyphosate, glufosinate and 2,4-D herbicides. LibertyLink GT27 soybeans, which also resist glufosinate and glyphosate, were launched last year on over 4 million acres, according to BASF.

Dave Kestel, a seed salesman for Corteva’s Pioneer brand in northern Illinois who also sells Xtend and LibertyLink, scents a pivotal shift.

“Monsanto’s been in the driver’s seat for a long, long time and that’s going to change,” he said.

Reporting by Tom Polansek in Chicago and Rod Nickel in Winnipeg, Manitoba