Monsanto Co. (MON) fears losing market for Roundup Ready Soy as Dow Chemical Co. (DOW), the biggest U.S. chemical maker, launches a genetically altered soybean seed. Dow has planned to stop the use of Monsanto’s widely licensed technology as well, in the next generation of its Enlist genetically modified soybeans.
The second generation of Enlist was recently submitted to the U.S. Department of Agriculture for approval, which DOW expects to achieve by “mid-decade”. Once approved, these soybeans are anticipated to substitute Monsanto’s brand of glyphosate weedkiller resistance for genetics, developed with M.S. Technologies LLC.
After Monsanto introduced its first Roundup Ready soybean in 1996, farmers started killing weeds easily through the system. But since then, glyphosate use over Roundup Ready soybeans, corn, cotton etc increased heavily and several species of crop-choking weeds have become resistant to glyphosate-based Roundup. Thereafter, these weeds started spreading rapidly through North and South America.
With the launch of Enlist system, Dow sees replacement for Monsanto's popular Roundup Ready system that accounts for more than 90% of U.S. soybean acreage as well as corn. Dow plans to target customers using Monsanto’s Roundup Ready seeds and Roundup glyphosate weedkiller claiming that the U.S farmers may now combat weeds that are no longer killed by Roundup herbicide of Monsanto.
Dow plans to start selling the first generation of Enlist herbicide tolerance by 2013 in corn, 2015 in soybeans and 2016 in cotton, pending regulatory approvals. Dow forecasts generation of approximately $1.5 billion of profit from herbicide and seed sales, which is anticipated to arrive as a direct assault on the dominance of global seed leader Monsanto Co.
Missouri-based Monsanto Company, together with its subsidiaries, is a leading global provider of agricultural products for farmers in the United States and internationally. Monsanto's biotechnology research and rich product pipeline provides strong competition to its peers, such as The Dow Chemical Company (DOW), Syngenta AG (SYT), The Scotts Miracle-Gro Co (SMG), BASF SE (BASFY.PK).
We currently maintain a long-term Outperform recommendation on the stock. Monsanto has a Zacks #2 Rank, which translates into a short-term Buy rating (1-3 months).
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