FEATURE-Monsanto, DuPont square off in crop seed turf war

* DuPont claims Monsanto holds "illegal monopoly"

* Monsanto CEO seeks probe by DuPont independent directors

* Justice Dept., USDA to examine antitrust concerns

By Carey Gillam

KANSAS CITY, Mo., Aug 18 (Reuters) - It's getting dirty down on the farm.

As U.S. farmers prepare to harvest billions of bushels of corn and soybeans -- key ingredients in food, livestock feed and transportation fuel around the world -- seed technology titan Monsanto Co (MON.N) and its chief rival DuPont (DD.N) are ramping up their rivalry to new heights.

DuPont is accusing Monsanto of illegal anti-competitive practices, while Monsanto counters that DuPont is engaging in a covert smear campaign that borders on fraud.

Monsanto CEO Hugh Grant this week sent a letter, a copy of which was obtained by Reuters, to DuPont chairman Charles Holliday accusing the company of a "serious breach of business ethics" and requesting that a special committee of DuPont's independent directors investigate what Grant called an "attack" on Monsanto's seed business.

Monsanto officials claim DuPont has supported forged documents and secretly funded Monsanto critics.

"This is just the tip of the iceberg of dirty tricks. I have never seen corporate conduct of this nature," said Monsanto lawyer Scott Partridge.

DuPont counters that it is simply trying to expose what it calls Monsanto's "illegal monopoly" and the harm it says Monsanto is doing to farmers and others up and down the food chain.

"This is not just a DuPont problem. This is a competition problem. They've gained illegal monopoly power," said DuPont attorney Don Flexner.

The stakes have now risen as both the U.S. Department of Agriculture and the Justice Department said this month they will launch an examination of competition and antitrust concerns in the seed industry.

"We understand that there are concerns regarding the levels of concentration in the seed industry, particularly for corn and soybeans," said Philip Weiser, deputy assistant attorney general in the antitrust division at the U.S. Department of Justice.

SOURED RELATIONS

Both companies have strong positions in the U.S. seed industry and have been racing each other and other competitors to develop higher-yielding crops through genetic modifications and other means.

This spring, the competition spilled into the courts as Monsanto and DuPont sued each other over a soured licensing arrangement.

Monsanto claimed DuPont was using its Roundup Ready herbicide-tolerant trait outside the scope of the agreement. DuPont countersued, seeking relief under antitrust laws to end what it calls "Monsanto's multifaceted, anti-competitive scheme to unlawfully restrict competition."

Monsanto claims, and DuPont does not dispute, that DuPont has been aligning with, and in some cases funding, groups critical of Monsanto.

Monsanto in turn has launched an effort to discredit DuPont, working with a Washington law firm to circulate documents that lay out a series of scathing accusations. The documents accuse DuPont of misleading investors about certain product capabilities, as well as involvement in what Monsanto has said were several falsified letters to lawmakers and others that criticize Monsanto.

Monsanto spokesman Lee Quarles said the company wants to protect itself against DuPont's "smear campaigns" designed to "compete through deceit."

DuPont spokesman Anthony Farina said Monsanto is engaging in a "campaign of diversion" and that DuPont was cooperating with a group of attorneys general from states including Iowa, the top U.S. corn grower, investigating Monsanto's business practices.

CRYING FOUL

The biotech corporate battle comes at a time when farmers, agricultural academics and consumer groups are growing increasingly concerned about climbing seed prices and industry concentration.

"We're hearing lots of complaints from farmers about huge price increases and that non-GMO (genetically modified) seed availability no longer exists," said Bill Wenzel, national director of the Farmer to Farmer Campaign on Genetic Engineering, which has been studying the sharp price increases in soy and corn seed in recent years.

A decade ago, DuPont's Pioneer Hi-Bred seed unit, based in Johnston, Iowa, controlled more than 40 percent of the lucrative U.S. corn seed market. But that had fallen to about 30 percent in 2008, according to DuPont, which gets about a quarter of its $30 billion in revenues from its agricultural and nutrition unit.

Monsanto's rapid rise in power over the last decade has come through a series of seed company acquisitions, broad licensing deals and tightly protected patents for its proprietary seed technology.

St. Louis, Missouri-based Monsanto pegs its market share for its branded corn seed at about 36 percent, and says branded soy seed enjoys a 29 percent share and cotton a 41 percent share in the United States.

But DuPont and other critics say that, through licensing deals with about 200 other companies, Monsanto's genetic traits are spread through nearly all of the U.S. corn, soy and cotton acres planted each year.

They say Monsanto's power translates into steep price increases for farmers and increasingly fewer seed choices.

"That level of concentration is scary," said Iowa State University agricultural economist Neil Harl. "The Department of Justice antitrust division is right on target in my view."

Monsanto recently announced, for instance, that its new Roundup Ready 2 Yield soybeans will cost farmers about $74 an acre in 2010 on average, while the current version of its Roundup Ready soybeans cost $52 an acre.

Monsanto said the price hikes are valid because farmers receive added value with technological improvements to the seeds, higher yields and greater efficiencies. It also argues there is no shortage of seed varieties.

Monsanto's prowess in the seed industry has made it a darling of Wall Street. Last year the company posted record net sales of $11.4 billion for fiscal 2008, a 36 percent jump from fiscal 2007.

Monsanto officials say they welcome the added antitrust scrutiny.

"This is a very competitive industry," said Partridge. "We welcome the opportunity to participate and to be involved in these discussions so people can learn more about Monsanto and how we compete." (Reporting by Carey Gillam; editing by Jim Marshall)