Simply put, this will be ” the largest introduction of a corn biotech seed product in the history of agriculture.”
From the release:
U.S. and Canadian farmers are one step closer to realizing the greater whole farm corn yield advantages of a new corn seed trait combination that will provide the most comprehensive insect and weed control and allow farmers to significantly reduce their refuge. These benefits will be realized through SmartStax™, which is the outcome of a cross licensing agreement and research and development collaboration signed in 2007 between Monsanto Company (NYSE: MON) and Dow AgroSciences LLC, a wholly owned subsidiary of The Dow Chemical Company (NYSE: DOW).
SmartStax, the agriculture industry’s most advanced, all-in-one corn trait platform, received registration from the U.S. Environmental Protection Agency (EPA) and regulatory authorization from the Canadian Food Inspection Agency (CFIA) and remains on track for a 2010 commercial launch. SmartStax combines each company’s industry-leading corn traits to provide farmers the absolute broadest spectrum of above- and below-ground protection available against insects and weeds versus any product in the market today.
Using multiple modes of action for insect control is the state-of-the-art proven means to reduce structured refuge and maintain long-term durability of corn trait technologies. SmartStax uniquely features a combination of insect control traits that significantly reduces the risk of resistance for both above- and below-ground pests. As a result, the decisions by the EPA and CFIA will allow reduction of the typical structured farm refuge from 20 percent to 5 percent for SmartStax in the U.S. Corn Belt and Canada, and from 50 percent to 20 percent in the U.S. Cotton Belt.
As part of today’s announcement, the companies noted that the new corn seed technology is expected to be offered to farmers on 3 million- to 4-million-plus acres in its first year of availability. The product’s launch would represent the largest introduction of a corn biotech seed product in the history of agriculture.
“Farmers are the real winners with SmartStax,” said Robb Fraley, Monsanto Chief Technology Officer and Executive Vice President. “The 5 percent refuge for SmartStax will give farmers a tremendous advantage to increase whole farm corn yield 5 to 10 percent. This is a key early step in our commitment to helping farmers sustainably double yields by 2030 to meet the increasing demands for grain for food, feed and fuel. This reduced refuge will be easier for farmers and will further reduce insecticide use while reducing grower risks and enhancing the long-term durability of the technology.”
If we haven’t talk enough here about the reasons for Dow NOT to sell Dow Ag, here is another. Let’s also not forget that Dow and Monsanto have a 10yr. agreement to develop more products by sharing each other seed lines. That means this is the first of more to come.
It is also true that the significance of this is being ignored/not understood by the media and investors. We live in a time in which we are being told “buy farmland” because the world population is on a relentless surge and folks need to eat, inflationary pressures should the develop favor physical things and biofuels are here to stay and corn is their principle feedstock. So, we now have an item that has shown to boost yields 5%-10% and there is not much being said about it? For those not sure, a 10% yield boost to a farmer is simply massive…
Again, after the year Dow has had, it is safe to say people are in a “prove it” frame of mind before taking the plunge. Who can blame them. It does mean that when it is proven, piling in will occur and we know that leads to rapid share appreciation. So
be patient and hold on when it happens.
Disclosure (“none” means no position):Long Dow ,None
13 replies on “SmartStax Receives EPA's Blessing”
Don't you question CODI's sale of equity, particularly at below book value?
not ideal, but i do prefer it to debt. I think they are getting caught up in the fig,bx wash…
i think a deal is coming…..
Yes, that would definitely make sense. It's an interesting looking company, especially because it is so small.
It looks sort of like a micro Berkshire/Leucadia. The furniture and the staffing business look pretty interesting, although the others strike me as a bit questionable. In the sense that they seem to be finding their niche (or targeted prices) by going lower on the quality scale.
Leucadia has definitely done something similar with great success, yet through special situations. For instance, the WilTel bankruptcy. That looked a lot like the K-Mart bankruptcy, in the sense that a large margin of safety was provided by a relatively hidden asset (meaning a large NOL carryforward in the former, and obviously real estate in the latter).
But with CODI, as I look over their portfolio, I sort of question what the governing philosophy is. They don't seem to be pursuing an approach similar to the others I've mentioned. They appear to be more of a mainstream private equity shop.
If what I wrote there is not clear, basically what I'm saying is this: let's say the circuit board or racing shocks business shits the bed. Then I'm not seeing much margin of safety or buffer of residual value. In other words, they appear to be buying relatively low-grade businesses, with a focus on improving operations. Is this a fair assessment?
the site has their acquisition criteria….very Berkshire-like.
like BRK they do not "buy and run" and keep current mgmt in place..
what i found interesting in the vid was that they are talking to other PE firms about buying assets, for pricing that is nice bcz it eliminates the "stock premium" shareholder would want/need..
Massoud seems like a very patient buyer …. the track record is good based on 2008 sales
Well, I agree they're Berkshire-like, but they might be missing some key Berkshire criteria.
For instance, even in the early days, Buffett was very focused on brand names and solid economics. Examples are the Buffalo News, See's, and Scott Fetzer. But the problem with low-grade manufacturing businesses is that they might be like Berkshire, literally — meaning the textile mills.
Yes, the private equity purchases could be very interesting. There is a reasonable likelihood that, just like any large business, they might shed assets at very discounted prices simply to get rid of them. This is going to be a huge area of opportunity going forwards, so CODI might be a nice way to play that.
no not really,
from what I gather the racing shocks are the premier shocks in the biz..
all of their businesses are major players in their particular field..
one thing to keep in mind is that even the buffett picks like the buffalo news, it had economics/name in buffalo only. much like the shock biz (fox). in its field it is very strong..
even the buffalo news had huge problems (and Wash Post) during buffett's reign.
as far as residual value should two of the biz, shit the bed, i'm not sure what would be left on any biz should 30% of the business go under. that being said, the real question is "how likely is it". based on those divisions results, not likely
Wait, they aren't Fox as in the motocross stuff that people wear? I thought they were like mountain bike shocks, where you also have really dominant companies like Rock Shox and Manitou.
With the Buffalo News, I just meant that for a long time it was a monopoly. In the late '70s and 1980s, that was really a premier asset to have. I've picked up the Buffalo News on a number of occasions when I've been in Buffalo, and it is a very high quality paper with tremendous local acceptance. In its day, that was a gem of a business.
All I'm saying is that with any company, you can't conclude that bad results aren't likely. It's like Buffett's textile mills. I don't think he would have went into them if he thought the results would be disastrous.
That's why I'm saying that I like to see some kind of value cushion, as in the K-Mart real estate example or WilTel and it's $5 billion NOL carryforward. The business can fail and you still make money.
oh i agree….too be honest results Q1/Q2 have/will be bad. that is why the stock is down 50%. a large part of the biz is temp. staffing
buying here though at 40% disc. to book i think provides a nice margin..no?
don't forget the 15% div. is as safe as it can be for next 12 months.
Yes, I think the discount to book looks very appealing. That's why was confused about the issuance of equity. This move is decidedly non-Berkshire-like.
On the other hand, niche manufacturing businesses like these are capable of earning very substantial returns on equity. I've looked over some seriously hideous (on the surface) industrial companies that earn 30+% ROE's.
Basically what I am trying to figure out is if they have a cohesive investment philosophy. Are they just accumulating companies, or is there some kind of overarching economic objective here (i.e., consolidation, building economies of scale, extracting capital, selling off assets, etc.)?
not consolidation (thankfully, that almost never works)….
their website has some general info, not too detailed i think for obvious reasons..
my take is they are going for a diversity of businesses..
they sold 2 last year near the peak and have been very patient before deploying that capital
too me, at this stage they look more like a Leucadia with a consistent shareholder distribution
a couple qualitative things, if CFO was high up at Stargas like title of CFO although it doesn't say, I hope he stuck his hand up because that company was going under in and around 2005 while it was paying for the CEO's high end country club membership and had his mother on the board, i think Fox is in a good position but Staffing?? this is one of the few industries where if you know some higher ups in a large organization you and I could start a firm tomorrow and go surf the web for candidates, which are plentiful right now, no moat or durable competitive advantage whatsoever, yeah contracts but most are not long term in this sector and once the relationship is gone like sales manager whose buddy was the contact for one of their larger contracts then that goes when the contract is up unless you can give them more money to stick around when the times are good and bad, only staffing firm i have ever heard people say they know of is Kelly because when you say Kelly, they say like the Kelly girls?? i've never heard anyone say, get manpower or staffmark on the phone right now, they always have the perfect people, dont get me wrong great biz with great margins but lots of competition
monsanto talkes a big talk to wallstreet, but hides the truth… check page 79. http://www.aphis.usda.gov/brs/aphisdocs/06_17801p.pdf. RR2 is not better than RR1. PLUS with the falling price of corn and beans, all the discounts and give aways in the seed industry. those increased prices are a pipe dream. – midwest farm guy