It may not have the allure of ethanol or be as sexy as corn, but Monsanto's
The agricultural giant is buying WestBred, a privately held wheat breeding company for $45 million. The move should jumpstart its competition with Syngenta
It's really a move back into wheat for Monsanto. The company was developing a Roundup-resistant wheat earlier this decade, but dropped the idea when farmers were less than thrilled about the idea. Since wheat is mostly consumed by humans, the biotech nature of a Roundup-ready strain would make it a hard sell compared to corn, which can be used as feed stocks for animals and in ethanol production.
Instead, Monsanto plans to develop wheat with less-controversial traits that produce higher yield, drought tolerance, and more efficient nitrogen use. The latter should pique the attention of fertilizer makers like Agrium
As farmers have shifted to more lucrative crops like corn, the acreage planted with wheat has fallen about 32% since 1981, but the decline in potential customers shouldn't worry investors. Despite the decrease in planting, demand for wheat is on the rise, raising the price of the final product. Monsanto should be able to make up for the lack of volume with increased seed prices, especially if it's able to offer seeds to farmers that can increase their yield.
Investors are going to have to wait for this long-term move by Monsanto to pay off, but diversification seems like an excellent move. As energy producers like BP
More Foolishness blowing in the wind:
- Global Gains hit a one-year triple with a small Chinese fertilizer company.
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