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Foreign regulatory approval delays push back Optimum GAT corn full-scale launch

Agriculture.com Staff 02/10/2016 @ 2:08pm

Optimum GAT corn's full-scale launch -- initially planned by its manufacturer DuPont and its seed company Pioneer Hi-Bred for 2010 -- will be pushed back due to foreign regulatory delays.

Optimum GAT is Pioneer's proprietary glyphosate-tolerant trait.

Pioneer currently anticipates Japanese import approval for Optimum GAT corn late in 2010. Approvals in Taiwan and Korea -- also large importers of U.S. corn -- will follow Japanese approvals, say Pioneer officials. USDA regulatory approval for Optimum GAT corn is currently on track for later this year, say company officials.

"We will have controlled releases in 2010 and 2011," says Doyle Karr, a DuPont spokesman. "Until we receive key export market approvals, we will limit what we put out to what we can manage. Japan, Korea, and Taiwan are big importers of U.S. grain. What we do in 2012 will depend on how things go there.

"Regulatory delays are not uncommon," adds Karr. "They happen in all industries. What has worked in past experiences may not work the next time. This time in Japan, we thought they would look at Optimum GAT corn and Optimum GAT soybeans at the same time. They chose to look at Optimum GAT soybeans first. Regulators may also ask for additional information. We always say about our plans that they are pending regulatory approval."

"All else being equal, this delay postpones by two years Pioneer's ability to use its own proprietary glyphosate tolerant trait instead of (Monsanto's) Roundup Ready trait," says Mark Gulley, a senior analyst at Soleil Securities who covers the ag seed and chemical sectors. Ordinarily, this would have increased Monsanto revenues while increasing Pioneer costs.

However, Gulley notes a cross-license agreement modification in 2007 (disclosed in a September 16, 2007 8K filing) takes away the financial sting from this delay. Since DuPont is paying a flat license fee per year for licensing Roundup Ready traits through 2015 equivalent to only around $4 per acre, instead of a per acre fee of up to $15 per acre, in reality the delay neither increases Monsanto revenues nor increases Pioneer costs, he says.

"The bragging rights side of things goes to Monsanto, but financially, it's a draw," says Gulley.

Earlier this year, Monsanto sued DuPont for inclusion of Roundup Ready glyphosate tolerance with the Optimum GAT soybean technology. Monsanto says this violates its contract and U.S. patent rights. DuPont claims Monsanto's lawsuit seeks to block farmers' access to innovative new soybean lines from DuPont's Pioneer seed company.

The 2007 agreement modification, though, is limited to corn cross-licensing and does not apply to soybeans. Thus, the litigation between the two parties on Optimum GAT soybeans is unaffected. Pioneer plans a full-scale launch of Optimum GAT soybeans in 2011, pending regulatory approval.

Pioneer stands by the agronomic attributes of Optimum GAT. "The Optimum GAT trait in corn continues to demonstrate excellent herbicide tolerance and product safety," said Paul Schickler, DuPont vice president and general manager and Pioneer Hi-Bred president in a press release.

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