Agriculture Stocks…

October 11, 2008 200810 2:30 pm | In Trading | Comments Off

Monsanto Company (MON)

Monsanto Company (NYSE: MON) is the largest producer of genetically modified seeds for crops such as corn, soybeans, and cotton. Monsanto beat competitor DuPont (DD) to market with the latest seed technology – a combination of draught resistance, insect resistance, and higher yield in a single seed – and has plans to release a seed with eight such traits by 2010.[1] Monsanto uses an aggressive and effective strategy of first capturing market share (through price breaks, if necessary), and then raising prices, which has made it the market share leader in the industry. It has an especially strong hold in Latin America and India, markets with large opportunities for agricultural and biotechnological expansion.

Biotech Traits

In addition to its standard products, Monsanto also sells source DNA material to other companies, including a few of its close competitors. For many seed companies, it is cost-efficient to buy tweaked genes from Monsanto that they can then insert into their seeds. Monsanto is currently estimated by Goldman Sachs to hold more than 90% of this "biotech traits" market.

Impressive!!!

Archer Daniels Midland Company (NYSE: ADM)

Archer Daniels Midland Company (NYSE: ADM), based out of Decatur, Illinois, is one of the largest commercial "agribusinesses" in the world. It processes cereal grains and oil seeds and deals with the storage and transportation of commodities. ADM's products are used agriculturally for human consumers and livestock, as well as in the fuel industry. ADM has become an increasingly international business, with firm footholds in both Brazil and China.

Expansion

During the last five years, ADM has invested $4 billion in building new plants, expanded current plants, and acquiring new plants and transportation equipment. In 2006 it announced plans to expand ethanol production by 550 million gallons and announced plans for the construction of two dry plants for corn milling. It also plans to construct a polyhydroxy alkanoate (PHA) natural plastics factory (with bioplastics firm Metabolix), a U.S. cocoa processing factory, and plans to increase U.S. Biodiesel production. These changes will come at an estimated cost of $3.1 billion over the next 4 years.

ADM is presently producing biodiesel in Brazil and is looking into Renewable Energy in the form of Ethanol. ADM currently holds partial ownership of the Brazilian company Cosan SA and there is speculation of larger buyouts. This would allow ADM to more fervently enter the sugar-cane ethanol market. Sugar-cane ethanol can be produced for $.90 per gallon, 30% less than the $1.20 that it costs to manufacture ethanol from corn.

Lotsa room to grow, eh?

Bunge (NYSE:BG)

Bunge (NYSE:BG) is an agribusiness and food company that is the largest producer of soybean oil and which has an immense stake in the South American fertilizer market. It also deals with commodities and works a great deal with Biofuels, especially Brazilian sugar-cane ethanol.

Fertilizer

Bunge is currently the largest supplier of fertilizer to South America. In Brazil it is involved in every stage of the process, from mining to marketing. It also controls 26% of the Brazilian NPK (nitrogen, phosphate, potassium) fertilizer retail market. A foothold in Brazil allows the company to greatly cut-down on transportation expenses to South America.

Wonder if there's room to grow along with Cargill & ADM down in LAM.