Please ensure Javascript is enabled for purposes of website accessibility

Agriculture Sector Looks Good in Genes

By Jack Uldrich – Updated Nov 11, 2016 at 6:08PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Innovations in genomics and supercomputing will fuel the agriculture sector’s future growth.

On the inside pages of today’s Wall Street Journal is a half-page advertisement from BASF touting its ability to get “48 miles per kennel.” The claim is a clever bit of hyperbole, but it does hint at a promising future for the entire agricultural sector -- an area which, as fellow fool Matt Koppenheffer noted earlier this year, is already doing quite well.

A new tool: the supercomputer
For centuries, the agricultural industry has been adept at applying the latest advances in technology to improve both yield and productivity. There is no reason to believe that this trend will stop anytime soon, and one unlikely hero in this unfolding technological revolution will be the humble supercomputer.

Earlier this week, researchers at Sandia and Oak Ridge National Laboratories announced that they were developing an exascale computer. For those of you counting at home, an exascale computer will be 1,000 times faster than today’s petaflop computers -- which, as I explained in this piece, are already wickedly powerful.

Now, these supercomputers won’t be tilling the fields or harvesting crops anytime soon, but they will allow farmers to reap more from every kennel of corn and acre of land. This is because supercomputers are the engines fueling the new discoveries being made in the rapidly maturing field of genomics.

This past week brought two noteworthy breakthroughs. First, a team of scientists announced that they had completed a working draft of the corn genome. Among other things, this development is expected to lead to better crop varieties that can meet society’s growing demand for food, livestock, feed, and fuel.

Last week, I wrote about how agricultural scientists at DuPont (NYSE:DD) had identified a key gene that boosts the yield of oil and oleic acid and explained how this could be a windfall to a company like Archer Daniels Midland (NYSE:ADM).

With the corn genome now unraveled, researchers will be able to take this advance many steps farther, including making corn both more nutritious and more efficient for ethanol production -- although not likely in the same cob. In addition to being a boon for large ethanol producers such as The Andersons (NASDAQ:ANDE) and Poet Energy, this could also alleviate some of the tension over the “food vs. fuel” debate by allowing farmers to squeeze more ethanol from each bushel of corn.

Who needs the rain?
A second area in which genomics promises to yield some important breakthroughs is in the creation of drought-resistant crops. In a paper published in Nature this week, biologists at the University of California, San Diego, outlined how they have isolated a gene responsible for opening and closing the stomatal pores, which regulate water loss from plants.

This might not sound like that big of a deal, until one considers that plants under drought stress lose 95% of their water through such pores.

If successfully developed at a commercial scale by a company like Monsanto (NYSE:MON) -- and this is still a big “if” at this time -- the advance could open up vast regions of the planet to productive farming. And because many of these crops will still need to rely on fertilizers and other chemicals to achieve maximum output, this could be a boon to companies like The Mosaic Company (NYSE:MOS) and Syngenta (NYSE:SYT), which supply those materials.

Foolish bottom line
As significant as these advances are, I would strongly advise Foolish readers to keep an eye on the work of geneticist Craig Venter. At a presentation at the prestigious Technology, Entertainment and Design (TED) conference this week, Venter disclosed his potentially world-changing “fourth-generation fuel,” which (as you may have guessed) is being fueled by advances in genomics.

As Venter noted, he has 20 million genes which he can genetically reengineer to “eat” agricultural feedstocks and “excrete” pure fuel. If he is successful, agriculture could not only feed the world, it could fuel it.

Advances in genomics are going to impact a great many industries, including health care and pharmaceuticals. But for my money, if you’re looking for an industry that might look really good in “genes,” you should consider the agricultural sector.

None

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Archer-Daniels-Midland Company Stock Quote
Archer-Daniels-Midland Company
ADM
$81.65 (-5.13%) $-4.42
E. I. du Pont de Nemours and Company Stock Quote
E. I. du Pont de Nemours and Company
DD
The Mosaic Company Stock Quote
The Mosaic Company
MOS
$48.53 (-7.60%) $-3.99
Monsanto Company Stock Quote
Monsanto Company
MON
The Andersons, Inc. Stock Quote
The Andersons, Inc.
ANDE
$30.40 (-4.88%) $-1.56

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
329%
 
S&P 500 Returns
106%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 09/24/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.