DOW and MON Announce Milestone on SmartStax with Reduced Refuge
I entered MON today on this news. Already have some DOW.
"• The News-- Dow AgroScience and Monsanto received approval from the US Environmental Protection Agency (EPA) and the
Canadian Food Inspection Agency (CFIA) for the SmartStax seed platform-an eight stack platform that provides multiple
sources of insect control (above and below ground) and herbicide tolerance for corn. Additionally, with the use of SmartStax
the EPA and the CFIA will permit reductions of the typical structured farm refuge from 20% to 5% in the US Cornbelt and
Canada, while in the US cotton belt the refuge will be reduced from 50% to 20%.
• The Numbers--Overall the reduced refuge combined with the improved insect control should improve yields 5-10%/acre above
the triple stack standard. Both DOW and Monsanto plan to launch this technology on 3-4mm plus acres in 2010, with the
expectation of growing to 50-65mm acres over the next 5-6 years.
• Both companies will sell the SmartStax seeds as well as license out the traits. As a result, we believe the total value of the
product at maturity can generate well over $500 million of revenue for the two companies (although the companies have not
indicated the split between the two).
• Why it Matters--Given the large scale launch starting in 2010 (3-4 million acres will be the largest new corn biotech launch)
and expectations for a relatively quick adoption rate compared to past genetic trait launches, we view this as a significant step
in DOW's attempt to drive growth and share gains in its high margin Ag business-as a reminder DOW hopes to drive its share
in corn from 4% to over 10% in the long-term.
• We reiterate our Outperform rating on DOW, believing it has the most compelling risk/reward profile of the large cap chemical
names and that the stock will reach at least the low-to-mid $20s in the next 12 months." (from Credit Suisse)
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