By Sabahatjahan Contractor and Rama Venkat
(Reuters) - German agrochemicals group Bayer AG (DE:BAYGn) has been blocked from selling its dicamba-based weed killer in the United States after an appeals court rejected a federal regulator's permit for the product.
A three-judge panel ruled that the U.S. Environmental Protection Agency (EPA) substantially understated the risks related to the use of dicamba which is found in herbicides made by Bayer (OTC:BAYRY) and its rivals.
Environmental groups, which filed a lawsuit in 2018, wanted the court to force the EPA to cancel its approval of Monsanto (NYSE:MON)'s dicamba-based XtendiMax product, arguing it not only harms nearby crops and plants but wildlife as well.
Bayer inherited this and other lawsuits two years ago as a result of its $63 billion acquisition of Monsanto.
The ruling also blocks the selling of other dicamba-based herbicides such as BASF's Engenia and Corteva Agriscience's (N:CTVA) FeXapan.
Both Bayer and BASF said they did not agree with the judgment issued on Wednesday. Shares in Bayer traded 3.3% lower by 0930 GMT on Thursday, while BASF slipped 0.7%.
Bayer said the ruling relates to the EPA's 2018 registration decision, which expires in December and it was working to obtain a new EPA registration for the weed killer for 2021 and beyond.
"Depending upon actions by the EPA and whether the ruling is successfully challenged, we will work quickly to minimize any impact on our customers this season," Bayer said.
The EPA had imposed restrictions on the use of dicamba in November 2018 due to concerns about the potential damage to crops surrounding those it was being applied to.
In February, Bayer had said it would appeal a U.S. jury's $265 million damages award against it and BASF in favor of a Missouri farmer who said the company's dicamba herbicide had destroyed his peach orchards.
The latest ruling comes days after, a California appeals court heard arguments in the first case that went to trial over allegations that Bayer's glyphosate-based weed killer Roundup causes cancer, resulting in an initial $289 million judgment against the company, later reduced to $78 million.
Monsanto had dominated soybean sales since the 1990s with Roundup Ready, modified to withstand the weed-killer glyphosate.
Some weeds have since developed resistance to glyphosate due to overuse, however, raising the need for soy that can resist alternative herbicides.