Bayer Faces More Weedkiller Woes as U.S. Court Bans Dicamba
(Bloomberg) -- Bayer AG is blocked from selling its controversial dicamba-based herbicide in the U.S. after an appeals court rejected a federal regulator’s permit for the product, compounding the German company’s weed-killer woes.
The three-judge panel concluded the Environmental Protection Agency had “failed entirely” to acknowledge some risks dicamba poses and that the agency violated federal regulations when it extended its approval of registration for the herbicide for another two years in October 2018.
The court, citing the EPA, said the decision could spur farmers to buy alternative seeds and pesticides. Weed killers can’t be sold or distributed in the U.S. without EPA registration. The decision is the latest blow to Bayer in the wake of its $63 billion takeover of Monsanto -- a deal that made the German company a leader in agriculture products but also saddled it with a mountain of legal liabilities related to weed killers.
“We strongly disagree with the ruling and are assessing our options,” Bayer spokesman Chris Loder said in an email. “If the ruling stands, we will work quickly to minimize any impact on our customers this season.”
Bayer shares fell 3.9% in Frankfurt trading Thursday. The company doesn’t break down sales of individual products or their active substances and declined to comment on sales at stake. BASF SE, which also makes dicamba, declined 0.3%.
‘Day of Reckoning’
George Kimbrell, of the Center for Food Safety and a lawyer in the case, called the ruling “a massive win for the farmers and the environment.”
“It is good to be reminded that corporations like Monsanto and the Trump Administration cannot escape the rule of law, particularly at a time of crisis like this,” Kimbrell said in an email. “Their day of reckoning has arrived.”
U.S. Secretary of Agriculture Sonny Perdue on Thursday called the ruling unfortunate, saying it eliminates one of the tools needed by food producers.
“Farmers across America have spent hard earned money on previously allowed crop protection tools,” he said in a statement. “I encourage the EPA to use any available flexibilities to allow the continued use of already purchased dicamba products.”
A less volatile formulation of dicamba was originally manufactured by Monsanto after its blockbuster weed-killer Roundup began losing its effectiveness, and farmers had to increasingly deal with resistant “super weeds.”
Dicamba is a central ingredient in Bayer’s XtendiMax, and can vaporize after being applied to crops and drift onto neighboring fields that aren’t resistant to the herbicide. It’s widely blamed for damaging 3.6 million acres of untreated soybeans in 2017, and more than 1 million acres in 2018.
The EPA “substantially understated risks that it acknowledged” concerning dicamba’s use, the appeals court said. The ruling applies to other dicamba-based herbicides produced by BASF and Corteva Agriscience.
“EPA is currently reviewing the court decision and will move promptly to address the court’s directive,” a spokesperson for the agency said.
BASF will probably lose about 80 million to 90 million euros in sales for the rest of this year ($90 million to $101 million) via its Engenia herbicide, which contains dicamba, Sebastian Bray, an analyst at Berenberg, said by email. That revenue hit will be bigger at Bayer, which also sells seeds tied to dicamba, Bray said.
Dicamba will probably stay banned even if this ruling gets appealed, Bray said. Still, the EPA will probably re-authorize dicamba in a revised form in time for next year -- and the agency could even move up that reauthorization before Dec. 20, when the current clearance was set to expire, Bray said.
“We are reviewing the opinion, its impact on our FeXapan registration, and our next steps,” Gregg Schmidt, a spokesman for Corteva, said in an email.
BASF said in a statement that the ruling will have a “significant adverse impact” on growers who have already purchased dicamba products for this season. The Ludwigshafen, Germany-based company disagrees with the decision and is considering its options to respond.
In the first lawsuit over dicamba crop damage to go to trial, a jury in February hit Bayer and BASF with a $265 million damage award to a Missouri farmer who blamed the companies for destroying his peach orchards. Bayer is challenging the verdict.
There are about 140 dicamba suits in total, and settling them could cost Bayer and BASF less than $1.5 billion, Holly Froum, an analyst with Bloomberg Intelligence, said in a note Thursday.
In its ruling Wednesday, the appeals court acknowledged the “practical effects” of the decision, including the cost to farmers who have already purchased soybean and cotton seeds genetically modified to withstand dicamba and planted for the purpose of using the herbicide.
The court quoted the EPA saying that voiding the dicamba registration “could leave those growers with an unusable pesticide technology system and force them to expend additional money on alternative seeds and pesticides.”
The judges said in addition to the environmental risks, the EPA’s registration decision on dicamba failed to recognize the “enormous social cost to farming communities” where the herbicide’s use “has turned farmer against farmer, and neighbor against neighbor.” A farmer in Arkansas was shot and killed in an argument over dicamba damage in 2016, according to the ruling.
The ruling applies to the 2018 dicamba registration, which expires in December, Loder said, adding that Bayer is working on a new EPA registration for the 2021 growing season and beyond.
The case is National Family Farm Coalition v. U.S. Environmental Protection Agency, 19-70115, U.S. Court of Appeals for the Ninth Circuit (San Francisco).
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