Glyphosate and Non-Selective Herbicides – Are companies managing regulatory risks?

Posted on September 17, 2018

Anna Bonomi
Anna Bonomi
Analyst, Healthcare & Chemicals Research

On 10th August 2018, Monsanto (acquired by Bayer in June 2018) was ordered to pay USD 289 million in damages, in the first lawsuit alleging the herbicide glyphosate causes cancer to go to trial in the US. As of July 2018, the number of outstanding lawsuits related to glyphosate reported by Bayer had jumped to 8,000. The case has triggered questions among investors and the public about the potential negative impact of non-selective herbicides on human health and the risks faced by companies involved in the manufacturing of these herbicides.

The Debate: Is glyphosate safe?

Scientific studies have linked glyphosate-based products to endocrine disruption, DNA damage, reproductive toxicity, neurotoxicity and cancer in humans. Moreover, in 2015, the International Agency for Research on Cancer (IARC), an arm of the World Health Organization, classified glyphosate as “probably carcinogenic in humans.” Despite the evidence, national regulators such as the US Environmental Protection Agency (EPA), the European Food Safety Authority (EFSA), and the European Chemicals Agency (ECHA), concluded glyphosate does not represent a risk to humankind and biodiversity, if the herbicide is used according to the product labelling.

The agricultural sector’s dependence on glyphosate-based products possibly explains the current scientific debate around the potential adverse side effects of glyphosate on humans and biodiversity. According to research, the global glyphosate market is likely to reach USD 8.50 billion by 2020 and the global demand is expected to exceed 1,000 kilo tons by 2020, with Monsanto being the main industry participant. If a ban on the use of glyphosate were implemented, the impact would be felt most by farmers and the agricultural sector, as crop yield productivity would sharply decrease.

Regulation: Hazard vs. Risk

To understand the current regulations regarding glyphosate, it is important to consider the difference between the concepts of hazard and risk, which play an important role on how regulations surrounding chemical substances are developed. Hazard can be defined as any source of potential damage, harm or adverse health effects on something or someone. On the other hand, a risk represents the likelihood of harm or adverse health effects in case of exposure to a hazard.

The IARC classification of glyphosate as a probable human carcinogen is taking a hazard perspective. From a risk perspective, however, glyphosate can have different effects when used in different doses. This can explain why glyphosate has not been banned in Europe and other jurisdictions. In December 2017, the European Commission granted glyphosate  allowing farmers to continue using the herbicide. This renewal can be considered short when compared to the typical 15-year lease.

Potential Ban: What are the impacts?

To date the national regulators, including the US EPA, the EFSA, and the ECHA, have not taken any actions against glyphosate-based products, however, national and international regulatory attention is growing. In some European countries governmental and societal resistance to glyphosate based-products is spreading. For instance, Germany has planned massive restrictions on any weed-killer containing glyphosate, but the deadline for implementing these restrictions was not disclosed. France declared that as soon as a viable substitute is available in the market, glyphosate-based products will be banned nationally. In August 2018, a federal judge in Brazil banned the use of any glyphosate-based crop protection products for 30 days, pending the Brazilian government’s reevaluation of the chemical’s toxicology. To date, no viable substitutes to glyphosate-based products, which guarantee the same agricultural outcome without increasing production costs, have been identified. However, should viable substitutes be identified, the probability that national regulators and countries will ban glyphosate is likely to increase.

A Changing Market: Are companies prepared?

The environmental and human health effects of increased herbicide use obviously need to be addressed. However, a ban on glyphosate usage would significantly affect agriculture production, since a suitable alternative is not yet available. We will take a closer look at integrated weed management and digital farming, and how they could provide answers to this problem.

  • Integrated weed management consists of integrating multiple methods to manage weeds. This practice can be divided into four phases: preventive and cultural agronomic practices, monitoring, physical control of weeds (through mechanical or thermal processes) and biological control. Is it worth noting that although integrated weed management can reduce overall herbicide use, it is also significantly more labour intensive than relying solely on herbicides.
  • Artificial intelligence-based farming tools help farmers to identify the selected crop where herbicides need to be administrated. Robotic weeders scan crops with a camera, identify weeds and zap the weeds with herbicide. Moreover, if digital farming tools continue to be successful a portion of the profit pools, now in the hands of the agrochemical companies, will shift to farmers and equipment manufacturers. Companies operating in the agrochemical industry have responded to these developments. In September 2017, Bayer AG partnered with German-based engineering company Bosch on a “smart-spraying” project. In April 2018, the company sold its digital farming projects to BASF, including the spray developed in collaboration with Bosch, as part of the divestment process required to acquire Monsanto.

The global glyphosate market was valued at USD 7.24 billion, as of 2017. Besides Bayer, major producers of the herbicide include Syngenta (acquired by ChemChina in June 2017), DowDuPont and BASF. We anticipate the glyphosate issue will continue to grow in importance and that national regulations will become more stringent within the EU, with additional bans to follow. Stronger regulation in the EU on glyphosate-based products is also likely to influence other countries, such as China. Moreover, the verdict in the August 2018 lawsuit against Monsanto could set a precedent within the industry for similar lawsuits related to glyphosate. Investors should consider engaging with agrochemical companies marketing glyphosate-based products on how they are managing this regulatory risk. This includes analyzing how companies are implementing programs to educate farmers on the use of glyphosate-based products, assessing whether companies are investing in the research and development of viable substitutes to glyphosate-based products as well as considering whether digital farming tools are present within the company’s product portfolio.