The Global Demographic Tailwind

[DewDiligence]

EPA Approves SmartStax Corn Seed from Monsanto and Dow Chemical

[The companies plan to launch SmartStax during the 2010 growing season in the US, Canada, Mexico, Japan, South Korea and Taiwan.]

http://www.reuters.com/article/marketsNews/idAFN2013459820090720

›Tue Jul 21, 2009 12:39am EDT
By Euan Rocha and Nichola Groom

TORONTO/LOS ANGELES, July 20 (Reuters) - Dow Chemical Co (DOW) and Monsanto Co (MON) said on Monday that the next generation of genetically modified corn seed received regulatory approvals in the United States and Canada, putting the largest ever launch of a corn biotech seed on track for next year.

Shares of both companies rose following the announcement, with Monsanto's stock up 5 percent and Dow's up 3 percent in after-hours trade.

The product, known as SmartStax, combines traits developed by both Monsanto and Dow unit Dow AgroSciences that provide significant improvements in insect and weed control, the companies said. They originally signed a licensing and collaboration agreement in 2007.

Significantly, the new technology will allow farmers to reduce the percentage of crops with no inherent insect protection that they are required to plant [the so-called “refuge” zone], resulting in a 5 to 10 percent increase in corn yields.

"This performance advantage will lead to a commercial advantage as SmartStax quickly becomes the product of choice for farmers," Monsanto Chief Technology Officer Robb Fraley said on a conference call with analysts.

Dow and Monsanto noted that the new corn seed technology is expected to be offered to farmers on 3 million to 4 million plus acres in its first year of availability.

The product presents a significant challenge to rival DuPont (DD), which recently said the roll-out of its new corn seed technology will be delayed, as regulatory approvals in Japan, Taiwan and South Korea were taking longer than expected. DuPont has said that even with U.S. regulatory approval, it would not commercialize the product until it had approvals in the other countries.

"What's really significant here is the size of the launch acreage," said Morningstar analyst Ben Johnson.

"Three to four million acres is a massive launch. It is really an aggressive step to go for the throat and get this product out in as many acres as possible before DuPont's Optimum AcreMax is even up on its feet," he said.

The new seed could be used by farmers on between 50 million and 65 million acres in the United States alone within the next five to six years, Fraley said. Total U.S. corn acreage has been roughly about 87 million acres in recent years.

Monsanto and Dow are seeking regulatory approval for SmartStax in Mexico, Japan, South Korea and Taiwan. Executives said on the conference call that they were confident of having those approvals prior to the product's launch.

The next generation seed offering, slated to be introduced for the 2010 planting season, will combine eight different herbicide tolerance and insect-protection genes.

The multi-gene product will protect the corn crop against above-ground] [corn earworm, European corn borer, southwestern corn borer, sugar cane borer, fall armyworm, western bean cutworm, and black cutworm] and below-ground insects [Western, Northern and Mexican corn rootworms]. It will also guard the crop from being damaged by some weed control chemicals.

The new technology will allow farmers to reduce farm refuge to 5 percent from 20 percent for SmartStax in the U.S. Corn Belt and in Canada.

U.S. farmers are permitted to plant biotech seeds with insect protection in about 80 percent of cultivated acreage, but regulations require about 20 percent of refuge area. Crops planted in the refuge area have no inherent insect protection, so bugs can feed in that area and not evolve around the insect protection.‹