Attack of the mutant rice (pg. 2)

By Marc Gunther, Fortune senior writer

The industry takes a hit

"This is a new kind of pollution," says Andrew Kimbrell, director of a Washington advocacy group called the Center for Food Safety, which opposes transgenic food. "You don't see it. It disseminates. It reproduces. It mutates. It's living pollution."

And here's the thing that really bugs many of America's 8,000 rice farmers: They didn't want to grow transgenic rice. It's not that they object to genetic engineering per se; many of them grow transgenic corn or soybeans alongside their conventional rice. Over the past decade, in fact, biotech crops have become staples of the American diet; about 60 to 70 percent of the processed foods in U.S. grocery stores contains oils or ingredients derived from biotech corn and soybeans, according to BIO, an industry group.

Nevertheless, an acrimonious debate about whether biotech food is safe for the environment and human health rages on amid considerable scientific uncertainty. Absent firm proof of danger, regulators in the U.S. have chosen to permit widespread bioengineering. But rice farmers know their market. About half of the U.S. rice crop, which was worth about $1.9 billion last year, is exported, and Europeans and Asian consumers simply don't want genetically engineered food.

"If I can't sell it, I don't want to grow it," says Jennifer James, who grows rice, wheat and soybeans, some of them transgenic, on a 7,500-acre farm near Newport, Ark.

And so the farmers are hiring lawyers and calling their congressmen and trying to decide whom to blame: Bayer Crop Science, which owns Liberty Link and is the target of dozens of lawsuits, or the U.S. government, which regulates agricultural biotechnology, or the Europeans, for their opposition to genetically modified crops, which many farmers suspect is a form of protectionism. (Funny, isn't it - European consumers won't buy genetically modified food, but French, Swiss and German drug companies sell biotechnology to U.S. farmers.)

Some farmers point the finger at environmental groups like Greenpeace for scaring people with their talk of Frankenfoods. Says James, who has decided not to sue: "Somebody screwed up somewhere."

Collectively, farmers and seed companies have lost hundreds of millions of dollars as a result of the contamination. Its origins remain a mystery. "This is the most traumatic thing I've seen in the rice industry in 30 years," says Darryl Little, the widely respected director of the Arkansas State Plant Board, who has tried to clean up the mess. "It's been devastating."

And not just to the farmers. Consider the plight of Scott Deeter, the chief executive of a Sacramento biotech firm called Ventria Bioscience. Ventria wants to grow rice that has been genetically engineered to produce proteins that can then be extracted and turned into low-cost treatments for diarrhea. Making the drugs by growing transgenic rice is cheaper than producing them in a lab. "The rice plant is just the factory," Deeter says.

Ventria's medicine would save lives, Deeter says. About 1.8 million children in poor countries die annually from diarrhea. The disease raises national security issues as well, Deeter told a congressional subcommittee. "During Operation Iraqi Freedom, 70 percent of deployed troops suffered a diarrheal attack," he testified. "This is a silent enemy attacking American troops."

Even before the Liberty Link brouhaha, Ventria struggled to find a home for its "pharma rice." California told the company not to grow it in the state after farmers objected. So did Missouri, after Anheuser-Busch threatened to stop buying Missouri rice if Ventria was allowed to grow there. (AB did not want diarrhea-fighting proteins to turn up in a Bud.) Last year Deeter took his plans for rice fields and a production plant to Junction City, a small Kansas town more than 200 miles away from the nearest rice farm.

That's not far enough to satisfy critics. The USA Rice Federation, an industry group, opposed Ventria's plans. Citing Liberty Link, the group said it does not believe that the USDA can protect "the environment and the public's food and feed supply from unwanted intrusions of genetically engineered materials."

"We're not anti-biotech, and we're not anti-Ventria," says Bob Cummings, the federation's senior vice president. "Our job is to protect our industry."

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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer LIBOR Warning: Neither BBA Enterprises Limited, nor the BBA LIBOR Contributor Banks, nor Reuters, can be held liable for any irregularity or inaccuracy of BBA LIBOR. Disclaimer. Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.