Monsanto, DuPont Race to Win $2.7 Billion Drought-Corn Market
By Jack Kaskey and Antonio Ligi
April 21 (Bloomberg) -- Lance Russell’s neighbors aren’t used to seeing corn growing in the fields around Hays, Kansas, where the plants tend to wither and keel over in the hot, dry summers. They may be in for a surprise this summer.
Russell is planting DuPont Co.’s drought-tolerant corn, one of the seeds heading to market next year that’s designed to thrive where water is scarce. An experimental plot in 2009 improved on the economics of the sorghum crop “by a landslide,” Russell said.
Monsanto Co., DuPont and Syngenta AG are vying for a similar windfall. After battling for a decade to corner the $11 billion market for insect-resistant and herbicide-tolerant technologies, the world’s biggest seed companies are vying to develop crops that can survive drought. At stake is a new global market that may top $2.7 billion for the corn version alone.
“It’s a race at the moment,” said Juergen Reck, a Frankfurt-based analyst at Macquarie Group Ltd. “They must see market potential.”
The technology will have wide-ranging effects, from helping farmers draw less irrigation water to lowering insurance premiums and boosting land values in drought-prone regions, agricultural economists say. The seeds also may increase corn plantings in the U.S. Great Plains at the expense of wheat and sorghum while altering the market for biofuels.
Perhaps most importantly for farmers, corn yields may climb. DuPont says seed being tested on 5,000 acres (2,023 hectares) this year is expected to boost yields in dry environments by at least 6 percent. Syngenta is targeting yield increases of at least 10 percent for its corn. Both companies used conventional breeding to develop the seeds for sale next year, with biotech versions due later in the decade.
The seeds will be a “big market” for Basel, Switzerland- based Syngenta, Chief Executive Officer Michael Mack said in a telephone interview. “Farmers around the world are going to pay hundreds of millions of dollars to technology providers in order to have this feature.”
Monsanto is moving directly to a biotech version that it says will increase corn yields 6 percent to 10 percent. The company’s seed, developed with BASF SE, may be put on sale in 2012 and become the first product genetically engineered to tolerate drought.
The Monsanto-BASF partnership, created in 2007, aims to have its drought genetics in 55 million acres of U.S. corn by 2020. In comparison, St. Louis-based Monsanto had at least one biotech trait in 82 percent of the nation’s 86.5 million acres of corn last year.----
Climate change may affect all of the variables. Global warming will increase vulnerability to drought in many U.S. regions, according to the Geological Society of America, and that may increase the need for drought-resistant seeds.
“If you are in the drylands, this is a big deal,” Mark Gulley, a New York-based analyst at Soleil Securities, said in a telephone interview.
It certainly is for Russell, the Kansas farmer. He said DuPont’s drought-tolerant corn outperformed other varieties by 15 percent last year when the weather was relatively moderate.
“Honestly, I wouldn’t mind a dry, hot year where I can really test these varieties,” Russell said.