Dow Chemical (DOW) Gets Key USDA Nod for Enlist Traits

Dow Chemical (DOW) has received the important approval of the U.S. Department of Agriculture (“USDA”) for the commercialization of its Enlist corn and soybean traits in the U.S. The much awaited deregulation decision came after the conclusion of a thorough review process. The USDA clearance marks a major milestone in the company’s strategic plans for long-term growth.

The Enlist traits are part of the Enlist weed control system that combines innovative traits and herbicides to meet challenging weed control issues. Farmers in the U.S. require new tools to address significant weed control problems.

The occurrence of resistant weeds has more than doubled since 2009 and infested roughly 70 million acres of farmland in the U.S., challenging farmers’ ability to produce healthy crops. The next-generation Enlist system is expected to provide them with novel and effective solutions to address these challenges and allow them to boost crop productivity to meet rising food supply demand.

The USDA approval applies to Enlist corn, Enlist soybean and Enlist E3 soybean traits. Developed through a partnership between Dow’s wholly-owned unit – Dow AgroSciences – and MS Technologies LLC, the Enlist E3 trait stack confers tolerance to 2,4-D herbicide, glyphosate, and glufosinate. Enlist E3 soybeans have demonstrated how new technologies can be implemented to speed up innovation, counter significant weed challenges and improve yields, which would eventually help farmers remain competitive.

However, the Enlist system has been criticized by various groups including the Center for Food Safety for potentially causing adverse effects on health and environment. Critics have warned that planting of Enlist corn will lead to a significant rise in use of 2,4-D herbicide, thereby triggering health threats.

With the USDA’s final approval, Dow now awaits registration of the Environmental Protection Agency ("EPA") of Enlist Duo, a companion herbicide to the Enlist traits. Approval of this herbicide is anticipated in the near future. Commercialization plans of the Enlist traits are expected in 2015 following the EPA decision on Enlist Duo. Dow expects the Enlist system to deliver blockbuster market opportunity. Enlist corn and soybean traits are approved in Canada.

In another development, Dow AgroSciences and Elanco – the animal health division of Eli Lilly (LLY) – landed a strategic R&D deal yesterday for developing innovative solutions that will allow livestock producers to increase meat and milk production to address the demand of the growing world population.

Dow is a Zacks Rank #3 (Hold) stock.

Other stocks in the chemical space worth considering include LyondellBasell Industries N.V. (LYB) and Celanese Corporation (CE). While LyondellBasell holds a Zacks Rank #1 (Strong Buy), Celanese carries a Zacks Rank #2 (Buy).