Cotton cultivation in India is increasingly relying on genetically modified (GM) seeds, and that presents an opportunity for Delta and Pine Land (NYSE:DLP). The breeder and producer of cotton planting seed just made a purchase that should bolster its chances in the subcontinent's fast-growing market, but it needs to do more if it hopes to avoid being marginalized by an aggressive competitor.
Delta and Pine disclosed this week that it has purchased Syngenta's (NYSE:SYT) global cotton seed business. The acquisition includes operations and assets in several countries, but management called the deal a particularly good fit for its India business. Delta and Pine's primary prize from the deal was control of cotton germ plasm containing Syngenta's VipCot insect-fighting genes. These cotton varieties contain a protein derived from bacteria that kills certain pests that feed on cotton plants.
The timing of the deal looks good, since India recently announced it has approved more GM cotton varieties for actual use, as well as large-scale trials of others. India, the world's third-largest cotton producer, has increasingly been embracing GM crops to boost production. Since 2002, the area in which GM cotton is cultivated has tripled to 1.5 million hectares, according to Reuters. The country's cotton production is expected to increase to 25 million bales for the year ended September 2006, up from 21.5 million in the prior year, an improvement some attribute to the proliferation of genetically engineered seeds.
Still, Delta and Pine is not a leader in this burgeoning market. The company that has made its name in transgenic crops, Monsanto (NYSE:MON), controlled a 21% stake in the Indian cotton market -- through its 26%-owned venture Mahyco Monsanto Biotech -- at the time of its purchase of cotton seed outfit Emergent Genetics last year. The Emergent purchase gave Monsanto an additional 10% share in India. Delta and Pine hasn't declared its Indian market share, but since its first major purchase in the country came earlier this year, its footprint is probably significantly smaller than Monsanto's.
Delta and Pine remains the world's largest cottonseed producer, thanks to its large share in the U.S. But global agriculture is changing, and developing countries like India are emerging as important producers. Delta and Pine's latest acquisition shows that the firm is attuned to these changes, but more acquisitions in the subcontinent appear to be in order if it hopes to effectively compete against Monsanto.
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Fool contributor Brian Gorman is a freelance writer in Chicago. He does not own shares of any companies mentioned in this article.
