Dow AgroSciences LLC, a subsidiary of The Dow Chemical Company (DOW), and Monsanto Company (MON) have entered into an agreement to create next generation of advanced weed and insect control technology in corn. The financial terms of the deal were undisclosed.
Dow AgroSciences will license Monsanto's Corn Rootworm III, a third-generation corn rootworm technology that controls the root-eating worms. On the other hand, Monsanto will license the use of Dow AgroSciences’ new Enlist Weed Control System herbicide-tolerant trait in field corn. Monsanto will thus be the first licensee of the Enlist trait in corn.
The agreement provides an opportunity for next generation products to build upon the current SmartStax platform for stacked-trait corn offerings. According to the companies, the stacked trait products are important for combating pest resistance and preserving trait durability. The technologies are expected to be introduced in sold competitively by both companies as next-generation weed and insect control products.
The agreement between Dow and Monsanto also enables the farmers to attain yields despite wide-ranging pressures from damaging pests. The farmers will also get an opportunity to bring together, for the first time, three different modes of action for below-ground insect control in a corn product. The farmers are also faced with the problem of Weed resistance and Enlist provides two modes of action for weed control to deliver performance that farmers currently require.
According to both Dow and Monsanto, the agreement paves the way for the U.S. introduction (pending regulatory approvals) of new next generation SmartStax products by the end of the decade.
Dow released its fourth-quarter 2012 results on Jan 31, 2013. The company reported a wider loss of 61 cents a share in the quarter compared with a loss of 2 cents in the fourth quarter of 2011, due to hefty restructuring and goodwill impairment charges. Dow’s adjusted earnings of 33 cents a share missed the Zacks Consensus Estimate by a penny.
Weak end-market conditions and lower pricing affected sales in the quarter. However, Dow’s agricultural business was a bright spot, with sales increasing at a double-digit rate. Dow is benefiting from strong fundamentals in agriculture and food markets and is leveraging its North American feedstock advantage.
Dow retains a short-term (1 to 3 months) Zacks Rank #3 (Hold).
Other companies in the chemical industry that are worth considering include Olin Corp. (OLN) and Akzo Nobel NV (AKZOY). While Olin retains a Zacks Rank #1 (Strong Buy), Akzo holds a Zacks Rank #2 (Buy).
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