Reporter's Notebook: Dicamba sale details, more on royalties

Reporter’s notebook: Dicamba sale details, more on royalties

Bayer and BASF are defending themselves against charges in a civil lawsuit that they intentionally caused "an ecological disaster" in order to increase their profits on dicamba-related products.

The Midwest Center for Investigative Reporting is one of the few media outlets covering each day of the groundbreaking trial as part of an in-depth project on dicamba, its makers and its impact. Your support makes this possible.

Read:
Day 1: Dicamba on trial: Internal docs show Monsanto, BASF prepared for drift complaints prior to dicamba launch
Day 3: Monsanto executive: ‘We anticipated (drift) might happen’
Day 4: Monsanto officials limited testing on its own plots
Day 5: Monsanto officials testified dicamba may drift, but not enough to harm crops
Day 6: Despite assurances to farmers, BASF told pesticide applicators dicamba may cause soybean damage
Day 7: Peach farmer takes the stand in lawsuit against Bayer, BASF
Day 8: In trial against Bayer and BASF, Missouri peach farmer testifies about alleged dicamba damage
Day 9: Weed scientist: With widespread pollution, ‘no way’ to know where drift that harmed peaches came from
Day 10: Peach farm one witness away from resting its case against Bayer, BASF
Day 11: Monsanto’s defense: Fungal disease, not dicamba, to blame for peach farmer’s problems
Day 12: BASF: Monsanto is a ‘fierce’ competitor, not a co-conspirator

Here's a look at day 12 of the trial, February 11, 2020.
By Johnthan Hettinger/Midwest Center for Investigative Reporting

Watch reporter Johnathan Hettinger and executive director Pam Dempsey discuss day 12 of the trial

BASF’s sales of dicamba to growers nationwide skyrocketed in 2016, according to documents presented in court.

In 2014 and 2015, sales were around $60 million. In 2016, with the release of dicamba-tolerant soybeans, sales were around $100 million, documents showed.

“Dicamba demand spike with DT trait,” read one point on a sales presentation.

Bader Farms is alleging in a federal lawsuit against Bayer, which acquired Monsanto in 2018, and BASF that drift from the herbicide dicamba harmed so many of its peach trees that it is no longer a sustainable business. The use of dicamba skyrocketed, starting in 2015, with the release of Monsanto’s genetically modified soybean and cotton seeds and the 2017 rollout of accompanying herbicides, which are made by Monsanto and BASF.

But Alyson Emanuel, a recently retired BASF executive, testified in federal court Tuesday that sales of Clarity, a BASF brand of dicamba, to retailers in its 10-state soybean and cotton region topped off in 2014 around $15 million, went down to $12 million in 2015 and were again around $15 million in 2016.

BASF sells both on-brand Clarity and off-brand formulations to retailers, who then sell the dicamba to farmers.

BASF’s sales of off-label brands of dicamba also topped off in the region in 2014, with sharp decreases in 2015 and 2016, according to a slide presented in court. The numbers on the slide were too small to read, however.

In 2014, BASF was preparing to temporarily slow down production of dicamba in its Beaumont, Texas, facility in order to upgrade the plant in preparation for the launch of Engenia. Production at the facility was cut in half between 2014 and 2016, though it was back up by 2018.

During the slowdown at Beaumont, BASF imported dicamba from China, according to documents presented in court.

George said BASF was “flooding the market” in preparation of dicamba-tolerant seeds and that retailers were holding onto the supply in 2014 and 2015.

George also asked Emanuel if sales to retailers or to growers was a better determination of what is happening in the field.

Emanuel testified she didn’t know what retailers did with their supply.

Royalty discussions

For every bag of dicamba-tolerant seeds sold, BASF receives payment from Monsanto. In 2016, that total was $1.3 million. In 2017, the company received $7.1 million.

What to call that money was a point of contention in court on Tuesday. Emanuel insisted the payments are royalties, but George said they are value-share payments, according to a contract negotiated between BASF and Monsanto.

That language could be critical in establishing profit-sharing in a joint venture.

In the past few days, Monsanto has started asking witnesses if they are aware that companies other than Monsanto sell Xtend seeds. Emanuel testified that she was aware that they do, but Monsanto is responsible for all of the acreage because it is paid for licensing agreements. BASF also gets a part of that compensation.

BASF also profits from selling dicamba to Monsanto.

BASF supported the deregulation of Monsanto’s dicamba seeds, according to documents presented in court.

Emanuel said that wasn’t because BASF makes money off the seeds; it’s because the deregulation of dicamba-tolerant seeds creates a market for Engenia.

Kay: Drift, not volatility, BASF’s concern

For BASF, concerns about Engenia were focused on drift, not volatility, said Scott Kay, BASF’s vice president of U.S. Crop Protection.

“Volatility is not a concern,” Kay said on Tuesday in video testimony.

That’s why the company purchased and gave away $5 million in nozzles for sprayers for farmers to show them, “hey, we’re doing something new,” Kay said.

“It was never reported to me that we have an issue around vapor drift,” Kay said.

He did not review any studies about volatility, he said. An email forwarded to Kay on Dec. 1, 2016, from Nathan Borgmeyer showed that Kay was involved in a discussion about how to represent volatility problems to customers. In that email, Debra Pickett, director of customer strategy at BASF, said that the EPA data showed volatility problems and BASF needed to figure out how to discuss that with customers.

“I don’t recall that,” he said.

Throughout the trial, both Monsanto and BASF have denied that there is any issue with volatility when the new Xtendimax and Engenia dicamba weed killers are applied according to the label. However, Ford Baldwin, a professor emeritus of weed science at the University of Arkansas and retained expert by Bader Farms, said volatility has been a major issue with the new formulations of dicamba and that the academic community has “moved on” from having that argument with the companies.

In an August 2017 survey, pesticide applicators from the Illinois Fertilizer and Chemical Association overwhelmingly reported problems with the new dicamba formulations, even when applying according to the label.

Kay said his focus of the survey was to question what the problem was -- inversions, physical drift or volatility. That showed that BASF needed to better educate applicators that volatility was not an issue, Kay said.

Kay also testified that BASF made it “crystal clear” to growers they could not apply older versions of dicamba to the new crops. He said employees were told they would be terminated if they did so.

Kay did not say if anyone had been terminated.

What’s next?

BASF is likely going to rest its case on Wednesday, wrapping up a two-and-a-half week trial.

Then, closing arguments will likely begin Thursday morning, with the case going to the jury afterward.

BASF’s attorney, John Mandler, said the company shortened its defense in order to make it fit into three weeks. Mandler said Monsanto did too, after Bader Farms took two weeks to present its case.

“They used two weeks of a two-week trial,” Mandler said.

BASF has one live witness and one 30 minute video remaining.

Billy Randles, an attorney for Bader Farms, said his rebuttal will likely take about five minutes.

There is still a lot of work left to do before closing arguments, said Judge Stephen Limbaugh Jr. He said he has to rule on which claims can go forward and formulate jury instructions.

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