Replies to post #1987 on The Rising Influence of Rising Affluence

[DewDiligence]

DuPont Is an Ag Company—Sort Of

http://online.barrons.com/article/SB50001424052970204309104576118593646762176.html

›FEBRUARY 5, 2011
By ERIN ARVEDLUND

Dupont, the chemicals giant, has a knack for changing with the times. It produced gunpowder for the Civil War, paint for early automobiles and Teflon and Corian for modern kitchens. Now comes food for a hungry world.

Last month, Wilmington, Del.-based DuPont (ticker: DD) bid $6.3 billion for Denmark's Danisco (DCO.CO), one of the largest producers of food ingredients. Assuming Danisco shareholders approve the deal, which seems likely, DuPont soon will derive more than a third of its approximately $30 billion in annual revenue from seeds, agricultural products and nutritional additives. Think of it as a 21st-century protein play: DuPont could energize its profits, and its shares, for years to come.

The push into food-related businesses is the signature move of CEO Ellen Kullman, who took the reins in 2009. DuPont is already a force in genetically modified seeds, and the acquisition of Danisco will push it further along the food chain. Danisco makes probiotics for yogurt, and locust bean gum for ice cream, cream cheese and infant formula. Its products do everything from keeping bread fresh to helping people lose weight.

The acquisition should start adding to earnings next year and boost long-term profit growth by about two percentage points, to between 13% and 14% annually, says Mark Gulley, an analyst at Soleil Securities. Two weeks ago, DuPont reported fourth-quarter earnings of 50 cents a share, excluding one-time charges, up from 48 cents a year earlier.

Although DuPont's stock hit a 52-week high Friday of 52.63, it still trades at an attractive 12.6 times analysts' 2012 consensus earnings estimates. Gulley sees it headed to 65 as the Danisco acquisition starts to pay off. While investors wait, they can collect a decent dividend of $1.64 a share, which translates into a current yield of 3.2%.

DuPont shares could be one of the best ways to get in on the boom in agricultural stocks [maybe]. With commodities surging, investors have been scrambling for ag stocks, and DuPont is cheaper than many. Fertilizer producer Potash Corp. of Saskatchewan (POT), for instance, trades for about 17 times expected earnings, and biotech leader Monsanto (MON) sports an even richer multiple of 22. Many investors have yet to think of DuPont as a food company, but that could change.

DuPont has a market capitalization of $48 billion and is a component of the Dow Jones Industrial Average. The company is best known for branded products such as Kevlar bulletproof fabric and Tyvek weather-resistant sheeting, used in construction, but it also makes pesticides, plastics, inks and coatings used in everything from cables to smartphone screens. An electronics group that makes photovoltaic products for the solar market is doing especially well.

The Danisco deal came as something of a surprise, although the two companies had a longstanding joint venture in ethanol. DuPont offered to pay a 25% premium over Danisco's trading price. While a Danish pension fund holding 5% of Danisco has called the price too low, Danisco now is trading close enough to the offering price to suggest the deal will go through.

DuPont is following a farm-to-table strategy in food, selling pesticides and seeds for corn, soybeans, sunflowers, canola and hybrid rice. In 2010 the seed business had revenue of $5.3 billion, up 14% for the year. Danisco will add another $3 billion in sales.

DuPont gets about a third of its revenue from developing markets and now is zeroing in on China's surging demand for food. The company already accounts for an increasing share of the corn-seed market in China, and Kullman was among the American executives visiting with President Obama and Chinese President Hu Jintao in Washington in January.

China's appetite for agricultural products is most evident in soybeans, where the country has become a net importer. [China recently became an importer of corn too: #msg-53059927]. In what Purdue University economist Chris Hurt calls one of the biggest trends in commodities, China bought 20 million acres of the U.S. soybean crop in 2010, double the volume of the mid-2000s.

Some on Wall Street are concerned about DuPont's sizable chemicals operations, given the company's dependence on oil and the growing strife in the Middle East. When crude jumped to $140 barrel in 2008, however, DuPont was able to pass the cost increases on to customers, says Gulley. "Oil is yesterday's story," he says.

For investors, today's story is simple: Eat up!‹

[DewDiligence]

Corny title for DE’s blowout results reported today:

http://www.thestreet.com/print/story/11010683.html

:- )

[DewDiligence]

MON Expects 80% Soybean Share in Brazil:

#msg-60109375

[DewDiligence]

Worldwide Biotech Acreage Jumps 10%—Brazil Leads the Way

[This Reuters piece highlights the premise for owning MON (one of my top-5 stock picks for LTBH). The geographic breakdown of the market for genetically-modified seeds is unlike that of any other market I follow: the US comprises 45% of worldwide GM acreage, while emerging-market countries constitute 48%! Europe, which has been dominated by Luddites, is the big laggard (but this is gradually changing: #msg-47335698). Even without Europe, the upside for GM seeds is enormous insofar as only 10% of worldwide farm acreage is currently GM.

Please see #msg-59333127, #msg-55511802, #msg-54541113, #msg-55517002, #msg-58519196, and #msg-60109375 for related stories.]

http://www.reuters.com/article/2011/02/22/us-biotech-crops-idUSTRE71L4H120110222

›Feb 22, 2011
By Carey Gillam

KANSAS CITY, Missouri (Reuters) - Global plantings of biotech crops increased 10 percent in 2010, continuing steady growth over the past decade that has been spurred by concerns about feeding a growing world population, according to an industry analysis.

While the United States remains the largest user of genetically modified seeds, Brazil posted the biggest growth, with plantings rising 19 percent, according to the report issued Tuesday by the International Service for the Acquisition of Agri-Biotech Applications (ISAAA), which promotes biotech crop adoption. That marked a rise of 10 percent over 2009.

About 10 percent of total global cropland is being planted to biotech crops, according to ISAAA [i.e. there’s a huge upside for market penetration of GM crops].

Brazilian farmers led the way, increasing their biotech crop plantings by 4 million hectares in 2010, more added farmland sown to biotech seeds than any other country last year, according to ISAAA Chairman Clive James.

"It is growing extremely fast," James said of Brazil's use of biotech crops, particularly soybeans. "The technology is here to stay."

The United States remained by far the largest adopter of biotech seeds, with 165 million acres planted to GMO crops in 2010 [45% of the world total], up 4 percent from 2009.

Globally, farmers last year planted 365 million acres of genetically modified (GMO) corn, soybeans, cotton and other crops.

U.S.-based Monsanto and DuPont's Pioneer Hi-Bred are world leaders in development of crops genetically altered to help farmers fight weeds, bugs and diseases [#msg-58519196].

…CHINA BECOMING BIOTECH LEADER

ISAAA's report said that while China planted only 3.5 million hectares [about 8M acres] to biotech crops last year, down 5 percent from 2009, policymakers there are encouraging development of biotech crops to address food security concerns for the fast-growing population. Among biotech crops being field-tested are GMO wheat, soybeans, potato, cabbage, papaya, and melon.

Pakistan and Myanmar were among three countries planting biotech crops for the first time last year, with farmers in those nations planting insect-resistant Bt cotton. Sweden also reported planting biotech crops for the first time last year as farmers there seeded a biotech high-quality starch potato approved for industrial and feed use [#msg-48575063].

Notably, developing countries grew 48 percent of the total global biotech crop tally last year, and are expected to continue to accelerate use of biotech crops rapidly, according to the ISAAA report.

James said he expects an additional 12 countries to adopt biotech crops by 2015 and the number of farmers planting such crop to double to 20 million with global hectarage rising to 200 million hectares, or nearly 500 million acres [an almost 40% increase form 2010 acreage].

Up to three or four additional countries are expected to grow biotech crops from each of the three regions of Asia, West Africa, East/Southern Africa and fewer from Latin/Central America, and Western and Eastern Europe.

Europe largely remains a steady foe of biotech crops, James said, though there are signs some European countries are softening [#msg-47335698].

"Europe is not lost but is by far the most difficult region to call in terms of future development," he said.

Advancements in new types of biotech crops should accelerate adoption, particularly drought-tolerant corn [#msg-58519196], and rice that is healthier, tastes better and resists pests. Biotech wheat that resists certain plant diseases is also on the drawing board.‹

[DewDiligence]

US Corn Yield 1980-2020

 
        Bushels/acre 

2020 180*
2010 153
2000 137
1990 119
1980 91

*USDA estimate; all-time best was 165 in 2009.Source: http://www.reuters.com/article/2011/03/11/us-crops-usda-corn-idUSTRE72A6PO20110311

[DewDiligence]

MON reports (uneventful) FY2Q11 results: #msg-61845286.