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Monsanto's Brazil Benefit

By Brian Gorman – Updated Nov 16, 2016 at 1:29PM

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Brazil is on the cusp of legalizing genetically modified seed sales, a potential boon for Monsanto.

A rising giant to the south is moving to finally legitimize genetically modified (GM) crops. And that's very good news for agricultural products giant Monsanto (NYSE:MON).

A bill that would legalize the commercial use of GM crops is making its way through the lower house of Brazil's Congress and is expected to pass soon, according to Reuters. A black market for such crops has been in operation in Brazil for some time, but the official sale of GM seeds was forbidden. Nevertheless, a third of the country's soybean crop and all of its cotton seed are thought to carry GM traits.

The Brazilian government is finally facing the facts and admitting that "there is strong demand" for biotechnology among its producers. Making GM seed purchases legal should stifle the black market and boost GM seed sales in the country. And the potential for such sales in Brazil is huge, because the South American country is truly becoming an agricultural colossus. In 2003, Brazil surpassed the U.S. as the world's largest exporter of soybeans, according to TheNew York Times. The country's output is also growing fast in a slew of other areas including cotton, corn, and orange juice.

For its part, Monsanto is waiting in the wings to begin selling its Roundup Ready GM soy seeds to Brazilian farmers. What's more, with its purchase of Emergent Genetics, Monsanto will become a force in cotton seeds in the U.S. and India. It's not a stretch to think that the company will try to extend that position to Brazil. Of course, Monsanto's competitors such as Bayer's (NYSE:BAY) Bayer CropScience and Syngenta (NYSE:SYT) are no doubt also very interested in Brazil as a market. Still, Monsanto's leadership in the field suggests that it will be a major beneficiary from Brazil's clearance of GM seed sales.

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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.

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