Bayer AG said on Tuesday it will scrap a nearly $1 billion project to produce the chemical dicamba in the United States, but said the move is unrelated to a federal court decision that blocked sales of weed killers based on the product.
The German-based company is moving to save cash as it wages an expensive legal battle to fight allegations that another product, its glyphosate-based weed killer Roundup, causes cancer. Bayer denies the claims.
The company said it is halting work on a new dicamba plant in Luling, Louisiana, because global overcapacity for producing the chemical made the investment less attractive. Instead, Bayer will continue to buy dicamba and produce its XtendiMax herbicide at another plant in Iowa, according to a statement.
“Stopping construction enables us to preserve cash and prioritize our investments in new innovation for farmers,” Bayer said.
A three-judge panel of the 9th U.S. Circuit Court of Appeals ruled on June 3 that the U.S. Environmental Protection Agency substantially understated the risks related to the use of dicamba, which is sprayed on soybeans and cotton that Bayer genetically engineered to resist the chemical. The herbicides are known to drift away and damage other crops that are not resistant.
The EPA subsequently said farmers can use existing supplies of dicamba-based herbicides, which are also sold by rivals BASF SE and Corteva Inc, until July 31.
“While the timing of the court’s ruling is coincidental and unfortunate, it was not a factor in our reassessment of the Luling plant,” Bayer said, adding that it still supports dicamba.
Monsanto, which Bayer bought for $63 billion two years ago, in 2015 announced preliminary plans to spend more than $1 billion over the next three to five years at its Luling site to produce dicamba. Bayer also inherited the legal dispute over glyphosate from the takeover.