Debugging Monsanto's Bug Concerns

Monsanto's (NYSE: MON  ) genetically modified corn seeds have become the talk of the town, for not-so-pleasant reasons, unfortunately.

There's been lots of news lately about bugs hitting Monsanto's pest-resistant seeds, raising doubts in investors' minds and even putting the stock under some pressure. But is it such a big cause for concern? I don't really think so. Here's why.

What is bugging Monsanto?
Monsanto's genetically modified, pest-resistant corn seeds came to life way back in 2003. Things were smooth until reports surfaced a few months back about several acres of corn in Iowa being affected by a bug.

And now, the U.S. Environmental Protection Agency suspects rootworms in four states to have developed tolerance to insecticides. All this has Monsanto entangled in a web of questions over its debugging technology. So what is Monsanto doing now?

Is it so serious?
Monsanto seems to be taking the EPA reviews seriously and is working with researchers to understand things. The company has also outlined some tips and recommendations for farmers for the next season. Among these is an idea to switch to Monsanto's SmartStax products, which offer higher insect protection.

I find this impressive -- the smart trick of using the bug issue to promote important products. These SmartStax products have impressed the EPA, too. This is why the EPA extended the registration of two of these products last month. This very move suggests how the entire bug concern may not be as serious as it is being projected.

What can Monsanto lose?
While Monsanto gets bugged, other players who are in the seeds and herbicides business could gain.

Peers like DuPont (NYSE: DD  ) and Dow Chemical (NYSE: DOW  ) , which offer similar genetically modified seeds, may take this opportunity to push their products harder. So far, DuPont's pest-resistant corn, developed with Dow, hasn't faced any issues. During its last quarter, DuPont also won approval for two new insect-protection products targeted at U.S. corn growers.

However, it isn't a death knell for Monsanto's corn seeds. One, it is the world's largest seed company. And two, demand for genetically modified feeds is growing globally, especially in emerging markets.

Global gains
Monsanto is betting big on emerging markets, especially the Latin American nations of Brazil and Argentina. In fact, corn accounted for the highest sales in Monsanto's largest segment, seeds and genomics, in its fourth quarter as demand in this region rose.

How fruitful these markets could be can also be gauged from peer Syngenta's (NYSE: SYT  ) optimism. Last month, it received approval to sell its genetically modified corn seeds in Argentina after launching them successfully in Brazil.

A rise in global demand should keep Monsanto's top line fertile.

The Foolish bottom line
You should be concerned if a company shows signs of slowing down when faced with problems. Fortunately, that's not the case with Monsanto. In its last quarter, Monsanto's numbers beat Street estimates, in spite of the bug concern.

Monsanto's confidence in its products is evident from the 17 new blended seed corn products it has lined up next year. Monsanto might just have to buck up its research and technology to deal with all the criticism. Besides that, I do not see any problems with this four-star ranked company that should scare you away.

Stay updated on how Monsanto debugs and grows by clicking here to add it to your stock watchlist, our free, personalized stock-tracking service.

Neha Chamaria does not own shares of any of the companies mentioned in this article. Motley Fool newsletter services have recommended buying shares of Syngenta. Motley Fool newsletter services have recommended creating a synthetic long position in Monsanto. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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  • Report this Comment On December 07, 2011, at 8:21 AM, LenAldis wrote:

    December 2011

    An Open Letter to Shareholders of Monsanto.

    As you prepare to study the various resolutions for the coming annual general meeting of your company, being held in St Louis 24th January 2012, I ask you to take into consideration the history of your company and the policies you have supported at various annual general meetings.

    It is a record that very few can be proud of. For example, can you as a shareholder be proud, even satisfied, that your company has been responsible for the deaths of many thousands of Vietnamese, many thousands of abnormal births in Vietnam, and today in Vietnam due to the product manufactured by your company, you have left four million Vietnamese suffering from various illnesses and deformities, and thousands of acres of once magnificent forests destroyed. The product was of course Agent Orange.

    At the time you attend the shareholders meeting it will be fifty-one-years ago that Agent Orange was first sprayed over Southern areas of Vietnam, 10th August 1961. It is well recorded by international scientists and researchers from a number of countries – and includes the US - what the effects of Agent Orange has had on the people and land of Vietnam.

    There has been and continues to be massive information about the effects of Agent Orange, and not only on the Vietnamese, ask the Vietnam Veterans from the US, Australia, New Zealand, and South Korea, who served in Vietnam, for many of them were also affected by Agent Orange. Many of these veterans are still campaigning in their respective countries for their illnesses to be recognised by their Government as being related to Agent Orange. Yes, it is a fact that not all the US veterans have been accepted as suffering from Agent Orange. Many have died, as have others, denied a pension or compensation for serving their country.

    Their relatives could be amongst the many outside the annual general meeting on 24th January seeking answers to the questions they want to raise with your Chairman Mr Hugh Grant and members of your board. You will see them when you walk into the meeting. Please do not avoid them, but stop and listen to their questions, and please answer if you can.

    Let me remind you that eighty-million litres of Agent Orange was sprayed on Southern Vietnam and this was carried out over a period of ten-years. And your company has for these fifty-one years refused to accept responsibility and has also refused to make any compensation to the Vietnamese. The word Sorry has not come from the lips of your Chairman, not has one cent come from the $billions of profit made from Agent Orange indeed, it has been you the shareholder that has benefited, in the dividends you have received over the years.

    Perhaps among you at the AGM will be Bill and Melinda Gates, it would be interesting to hear if they make any statement that they are satisfied with the record of your company, having purchased 500,000 shares. Perhaps they will seek to ask how they can help Monsanto in its campaign to increase its sales of GM Seeds world-wide, another Monsanto product that has cost the lives of thousands of Indian Farmers who were forced into debt through the failure of their GM crops. And outside the meeting will be American farmers who do not want GM Seeds but a number of them have been taken to court by your company to protect its sales and in turn its profits and your dividends. Are you really proud of your company, one that has cost so many lives, has ruined the lives of so many others in many countries?

    I hope you will consider the content of this letter, written by a person who has travelled to Vietnam for the past twenty-years and has seen the horrors of the legacy your company Monsanto has left to the people and land.

    In my years of travelling there I have seen babies, youngsters, teenagers and adults crippled and in many cases minus limbs, eyes etc through being affected by Agent Orange. Remember also this: the Vietnamese affected and aged under forty-years, would have been born after the spraying ended in 1971 and amongst them are the fourth generation. So the suffering continues, generation after generation after generation, that is the legacy your company has brought on the people of Vietnam.

    So, when it comes to cast your votes, for who, and for what, will you vote?

    Len Aldis. Chairman

    Agent Orange Action Group

    Flat 2, 26 Tomlins Grove

    London E3 4NX

    lenaoag@gmail.com

    www.aoag.org

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