Syngenta AG (SYT) faces lawsuit from legal firm Scott+Scott LLP on grounds of commercializing its genetically tailored corn trait MIR162. The Connecticut law firm has filed a case against the company on behalf of the U.S. corn farmers, who faced severe losses due to the fall in Chinese export demand arguably triggered by Syngenta.
Syngenta develops and trades certain types of genetically modified corn traits in the market. In 2012, it introduced a new genetically adapted MIR162 corn trait under the brand name of Agrisure Viptera, which is a primordial constituent of Syngenta's insect-controlling chemicals. The substance helps farmers to keep a check on corn pests and hence, improves their overall crop yield. Agricultural authorities in many countries such as U.S., Argentina, Canada, Brazil, Indonesia, Colombia, Japan and Paraguay have already permitted the usage of Agrisure Viptera for ensuring greater supply of food grains.
However, fearing that the chemical would contaminate the quality of U.S. corn, regulatory authorities of China banned the authorization of Syngenta’s MIR162 trait import within its domestic domain since the beginning of 2013. According to recent reports, the Chinese government has finally agreed to import the U.S. modified corn trait MIR162. Nevertheless, it is alleged that Syngenta's premature launch of Viptera modified corn trait remarkably lowered the market demand for U.S. corn in China, ultimately diminishing its global price. As a result, this caused significant monetary damages for numerous corn exporters in the U.S.
Scott+Scott LLP has significant expertise in prosecuting prominent antitrust cases, market securities and issues related to consumer rights in the U.S. The law company has claimed that Syngenta persuaded farmers to grow MIR162 corn trait, while virtually promoting usage of the modified trait with other types of corn supply. The company allegedly misled the U.S. corn farmers into believing that the MIR162 trait would be acceptable to the Chinese regulatory authorities.
Syngenta is a popular agro-based solution provider, with a wide global network of branches. The company aims to improve the global crop productivity without hampering the quality of the natural environment. Not only does the Agrisure Viptera’s import sanction augments the brand status of Syngenta, but it would also help in improving the food security level of the most populated country in the world.
In the latest reported quarter, Syngenta’s gross revenue was $11.5 billion, up 3% from the year-ago value. In order to earn greater revenues and margins in the upcoming quarters, the company constantly attempts to expand its business in the booming economies of the world. China, as an emerging economy, currently ranks third in creating the highest demand for U.S. corn exports.
However, the government authorities of the country are highly skeptic regarding the imports of genetically modified agricultural products. Although Syngenta secured import approval for MIR162 corn trait in China, its initial banning resulted in a loss of billions. Adverse impacts of such legal issues might offset the benefits of the company’s organic growth plans. Based on these factors, we anticipate Syngenta to perform in-line with the broader market in the upcoming quarter.
With a market capitalization of $31.18 billion, Syngenta currently carries a Zacks Rank #4 (Sell). Some better-ranked stocks in the industry include Wilmar International Ltd. (WLMIY), Cosan Ltd. (CZZ) and Gruma S.A.B. de CV (GMK). While both Cosan and Gruma carry a Zacks Rank #2 (Buy), Wilmar carries a Zacks Rank #1 (Strong Buy).
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