How Monsanto Is Driving a New Agricultural Revolution

When Monsanto (NYSE: MON  ) acquired The Climate Corporation on November 1, it effectively took control of all of the variables that farmers cannot control on their own. The goal of the acquisition is to provide farmers with more information and tools regarding the climate, and is in-line with Monsanto's goals of improving agricultural productivity.

Monsanto understands basic biology
Elementary school biology taught us that to grow a plant, one needs a seed, sunlight, and water. Monsanto, DuPont (NYSE: DD  ) and Syngenta (NYSE: SYT  ) all provide the one major purchased component that all crop farmers need: seeds with which to grow their crops. Beyond the planting, there is plenty of discrepancy on the other inputs from pesticides to fertilizers, but the seed is the one absolute investment requirement for crop farmers.

A century ago, agriculture was a self-sustainable business where seeds were saved from season to season, fertilizer was provided on-farm by livestock, and pesticides were natural products that were used scarcely by today's standards. The twentieth century saw a radical change in agriculture, as the Haber Process revolutionized fertilizer and transformed it into a commodity business and chemical companies developed and marketed pesticides that enabled more consistent crop yields.

Monsanto's contributions came late, but have since spurred a second agricultural revolution. The commercialization of Roundup herbicide in 1976 and the subsequent introduction of Roundup Ready Soybeans twenty years later changed the playing field. Monsanto's Roundup Ready Seeds and the Pioneer Hi-Bred products now owned by DuPont were created in response to farmer demand, with farmers seeking to get the highest yields from their crops. Seeds have since become an absolute consumable, and farmers' dependence on Roundup translated into Monsanto seeds being a no-brain decision.

Why Monsanto is making a climate move
Increasing crop productivity is Monsanto's (and DuPont's and Syngenta's) business. Like the productivity-increasing agriculture products of the twentieth century, Monsanto sees the weather-predicting prowess of The Climate Corporation as not only a tool to help increase crop productivity, but also as a business capable of producing substantial annual returns. Monsanto may be taking what looks like a huge $1 billion risk on the acquisition, but the move makes complete sense if one looks closer at what Monsanto has been developing beyond just seeds and pesticides.

Monsanto engineers plant traits that enable healthy growth under extreme conditions. Roundup Ready Seeds were an early example, where plants were engineered to withstand a broad-spectrum herbicide that made for less-than-hospitable conditions for the plants. More recently, Monsanto, in conjunction with BASF, has shifted some of its efforts to developing crops that can produce high yields despite extreme environmental conditions like drought. Paired with other efforts, such as its research to increase crop productivity while conserving water resources at the Water Utilization Learning Center and the voluntary participation in the Chicago Climate Exchange, Monsanto has demonstrated an interest backed by significant investment in climate and environmental matters.

Furthermore, Monsanto already invests significant resources into collecting and analyzing crop and weather data. The tools provided through the acquisition of The Climate Corporation will build on Monsanto's existing efforts and will complement their existing Integrated Farming Systems research platform. Farmers' utilization of these resources will have some price tag associated with it, whether it be in the form of a direct fee for the services or a less measurable impact related to increased yields from Monsanto products that expand the seed technology dominance already imposed by the company.

Sunny skies ahead
Monsanto is mostly alone in taking a direct approach to address the effects of climate conditions on agricultural productivity. Syngenta and DuPont create and are developing products to withstand extreme environments, but Monsanto's investment to provide farmers with tools that may reduce weather-related risks is a direct and forward-looking approach that will pay off for Monsanto.

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Read/Post Comments (14) | Recommend This Article (9)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On November 23, 2013, at 12:13 PM, funfundvierzig wrote:

    Monsanto's savvy leadership has created an impressive trinity to keep Monsanto on the cutting edge of seed and agricultural biotechnology for years to come:

    Coupling with the largest and most innovative chemicals enterprise on the globe, BASF, and coupling with The Climate Corp.

    …funfun..

  • Report this Comment On November 23, 2013, at 12:21 PM, funfundvierzig wrote:

    Investors are apparently impressed with Monsanto's revolutionary approach. They value Monsanto at the end of trading Friday, Nov. 22, 2013 @ $ 60 billion versus $36 billion for Syngenta and only $57 billion for the entire much larger but lagging DuPont conglomerate, including DuPont AG & NUT containing Pioneer.

    ...funfun..

  • Report this Comment On November 23, 2013, at 2:01 PM, RealityChecked wrote:

    The increased yield story is not the case, only increased profits for Monsanto. GMO crops are not holding up to the tests. More countries are shunning Monsanto,and states like Hawaii are shutting the GMO out...goood to see,

    University Corn Trial Results Suggest Non-GMO Hybrid Performance Is Competitive With GMO Counterparts

    Non-GMO hybrids are a proven alternative for corn farmers, attesting that consumer food prices don't have to rise due to yield differences.

    PR Newswire

    LINDEN, Ind., Nov. 20, 2013

    LINDEN, Ind., Nov. 20, 2013 /PRNewswire/ -- Corn hybrid trials in Illinois have been harvested, and results are showing Non-GMO corn hybrids performing as well or better than GMO corn hybrids.

    (Photo: http://photos.prnewswire.com/prnh/20131120/CL20335)

    Spectrum Premium Non-GMO hybrids, used in the testing, produced 3 to 10 more bushels per acre when compared to nationally known GMO corn hybrids. Trial details: http://bit.ly/1baSkPt

    These regional data summaries are evidence that farmers now have the opportunity to lower input costs and effectively increase profitability with the use of Non-GMO corn hybrids.

    "In addition to competitive yield performance, our aim is to exceed seed purity demands from grain producers as well as grain users across the country who are trying to reach a fast growing consumer market for food products derived from Non-GMO sources," says company Sales Manager Roger Rudolph.

    Spectrum Premium Non-GMO™ is an independent brand of genetically improved corn seed sold in 38 states. The company is based in Linden, Indiana.

    See a recent article about the launch and growth of Spectrum Seed, published in County Folks East & West, a Lee Publication based in New York.

    Article link http://countryfolks.com/the-divine-road-less-traveled/

    To see full feature article or for more information, please visit spectrumseed.com

    http://www.spectrumseed.com/sites/default/files/spectrum_art...

    Media Contact: Scott Johnson, 866-400-9468, Scott.Johnson.@spectrumseed.com

    SOURCE Spectrum Seed

  • Report this Comment On November 23, 2013, at 5:31 PM, dumbo wrote:

    no thanks to prostate cancer and rgh rbst Monsanto treats people like lab rats.

  • Report this Comment On November 23, 2013, at 8:35 PM, egmn99 wrote:

    If their products are so good and safe, why will they not release the studies of what is actually in the grain. Independent studies show that grain with the roundup gene contains unsafe levels of glyphosate and formaldehyde and are causing health issues in humans. Time will tell, but humans will suffer in the meantime.

  • Report this Comment On November 23, 2013, at 8:58 PM, cooneysean wrote:

    They need to educate the public on the NON dangers of geneticall modified food.

  • Report this Comment On November 24, 2013, at 5:21 AM, MrBIG wrote:

    Monsanto is not about health, not about productivity, not about making food safe. Monsanto is about shareholder value, nothing more.

    The MIT Study by Stephanie Seneff shows how Round-UP is responsible for most of the degenerative diseases that are epidemic in America today as a result of glyphosate (Round-Up) in the blood stream of many Americans suffering from these diseases.

    GMO is NOT SAFE and is damaging huge numbers of people and Monsanto must be stopped from creating these products.

    “Glyphosate's Suppression of Cytochrome P450 Enzymes and Amino Acid Biosynthesis by the Gut Microbiome: Pathways to Modern Diseases”

    http://www.cornucopia.org/entropy-15-01416_Glyphosate.pdf

    Another GMO scientific study:

    http://gmoseralini.org/en/

    Do your homework folks and let's get GMO labled and out of the market!

  • Report this Comment On November 24, 2013, at 6:36 AM, Investfarm1 wrote:

    Before you recommend Monsanto, you might want to try and understand the movement towards organic. I, like many consumers, am only purchasing organic foods and doing anything possible to avoid purchasing anything produced by Monsanto. I'm the fastest growing part if the economy with the most disposable income and I'm all over the world.

  • Report this Comment On November 24, 2013, at 11:34 AM, bbfree1 wrote:

    Monsanto is ALL about profit, PERIOD!!!!!

    The EPA is a Joke and is in lock step with them!!!

    Else, WHY haven't they BANNED all the pesticides

    that is harmful to people, pets and planet!!!!!!

  • Report this Comment On November 24, 2013, at 12:41 PM, maddog60 wrote:

    When buying produce check country of origin if not from U.S. save the seeds and replant yourself most of the rest of the world will not use gmo seeds

  • Report this Comment On November 24, 2013, at 2:35 PM, TheLightBearer wrote:

    Thank you Monsanto! You have acted in the best

    interests of our profit driven capitalist system by

    providing improved seed to feed the world while

    reducing the amount of water required. May you

    be successful for decades to come.

  • Report this Comment On November 24, 2013, at 4:32 PM, frellmedead wrote:

    This propaganda brought to you by Monsanto, taking over and contaminating the food supply, one crop and one paid-off politician at a time.

  • Report this Comment On November 25, 2013, at 2:57 AM, Trolly wrote:

    I would rather slit my wrists than buy stock in Monsanto.

  • Report this Comment On November 25, 2013, at 3:01 PM, Farmhound wrote:

    I have to laugh ready these posts. Glyposate in seed? What? World Domination? Organic is fine if you want to pay the extra money for the same nutritional value. Oh, and don't forget to wash it well as more people die from organic mellons than ever died from GMO's.

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