Tuesday November 7, 5:47 pm Eastern Time Monsanto growth seen curbed by ag biotech furor By Susan Kelly CHICAGO, Nov 7 (Reuters) - If there is one global company that has come to symbolise crop biotechnology, it is Monsanto Co. (NYSE:MON - news). But the maker of Roundup, the world's No. 1 herbicide, had managed to stay out of the glare generated by the StarLink corn controversy until this week, when an environmental group said it found the company's Roundup Ready corn in tortilla chips sold in British supermarkets. The corn, genetically engineered to tolerate applications of Roundup, is not approved for sale in Europe, and Monsanto is challenging the group's claim. Analysts say Monsanto, founded in 1901 by a chemist to manufacture saccharin, the first artificial sweetener, faces uncertain growth prospects as it stakes its future on agricultural biotechnology in the midst of a fierce public debate over the safety of genetically modified foods. ``Ag biotech, at least for the near future, is going to be much less attractive in the public eye and therefore investors' eyes, than pharmaceutical biotech. Ag biotech is really becoming the orphan sector,'' said Brian Halweil, researcher with Worldwatch Institute. Monsanto's agricultural business last month was partially spun off from pharmaceutical maker Pharmacia Corp. (NYSE:PHA - news), renamed after the merger earlier this year of Pharmacia & Upjohn and the original Monsanto and its G.D. Searle unit. Now 85 percent owned by Pharmacia after an initial public offering of the other 15 percent, the new Monsanto is focused solely on crop technology. Since the IPO on October 18, shares of Monsanto are up a respectable 15 percent despite a difficult climate for new issues in a shaky stock market. Monsanto stock closed down 1/16 at $23-1/4 Tuesday on the New York Stock Exchange. The discovery in September of an unapproved variety of bioengineered corn, called StarLink, in Taco Bell brand taco shells has helped deflate expectations for ag biotech companies as it soon became apparent the tainted corn had spread throughout the food supply. The StarLink corn, made by Aventis SA (NYSE:AVE - news), is approved as an animal feed in the United States but not for human consumption because it contains a protein that could cause allergic reactions. ``It's setting back the industry in terms of commercial growth,'' said equity analyst Sano Shimoda, president of BioScience Securities Inc. ``Monsanto and a number of companies involved in agricultural technology were expected to create tremendous growth and profitability. The valuations of all those companies have come tumbling down.'' Monsanto raised $700 million in the offering, less than the $735 million to $840 million it had expected, and the shares were initially priced at $20, below the expected range of $21 to $24 per share. The finding of StarLink corn in the taco shells, which were made by Philip Morris Cos.' (NYSE:MO - news) Kraft Foods unit, touched off the recall of nearly 300 kinds of taco shells, tortilla chips and tostadas from U.S. grocery stores due to suspected contamination. ``Suddenly people like my grandparents have heard about agribiotech because the corn made it into some brand names,'' said Halweil. Monsanto, for its part, sees its mission as one of educating consumers that its products are healthy, safe and of the highest quality, said company spokeswoman Scarlett Foster. ``It doesn't mean that we don't have a challenge, but the widely accepted belief that consumers are up in arms is inaccurate,'' Foster said. Monsanto's image was tarnished in the 1960s when it produced PCBs, chemicals used in lubricants and coolants that were found to be carcinogenic and banned, and Agent Orange, a toxic defoliant used by American troops during the Vietnam War. Analysts said Monsanto remains dogged by a reputation for arrogance, especially in Europe, formed in the biotech industry's early days. ``The attitude was, we'll supply the product and you'll eat it,'' said Nick Young, chief executive of consulting firm Promar International. ``There generally wasn't an appreciation that Europe would dig its heels in.'' In the long haul, Monsanto and the ag biotech industry will benefit from development of gene traits that provide health benefits, such as lowering fatty acids or increasing plant estrogens known as isoflavins, that form the basis of so-calledm ``functional foods,'' analysts said. ``The storm clouds are overhead. They are black. The question is, when will they see sunshine? The issues are very difficult to resolve because you are dealing with perceptions,'' Shimoda said.