Future Investment

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Seeds 2 (pure fractal flame) Artist: Cory Ench via Fractal World Gallery

Seeds 2 (pure fractal flame)
Artist: Cory Ench via Fractal World Gallery

This year marks the first time that all Monsanto Roundup Ready genetically-modified seeds will be off-patent. This means that any company can start making ‘generic’ versions of the GM soybeans, corn and so on – unless, of course, their use and the use of the companion Roundup-based herbicide has been banned*.

The path ahead is complex. Up until now, the source of these particular GM seeds was Monsanto, together with companies to which Monsanto had licensed the use of the these products. As of 2010, this accounted for a staggering 98% of soybean seed and 79% corn seed sales  in the world.

A double-edged sword: On the one hand, Monsanto vigorously guarded the use of its product, taking even farmers who had never planted Roundup Ready seeds to court because open pollination had left them with traces of GM crops in their fields. But it also meant that farmers who might like to ‘go GM’ didn’t due to contractual or pricing concerns. Well, those concerns may fade now, and GM use may spread.

It’s always interesting to take a look at this issue from a different perspective, and sometimes I do that by reading the investment news on seed and chemical companies.

Last year, an article on MSN Money took a look at the Big Three seed companies: Monsanto, Syngenta and DuPont. In choosing which seed company was the best investment, author Jim J. Jubak factored in the loss of patent control, as well as how much of each company’s revenue was actually seed-based (high margin), how much was based on chemical crop protection (‘volatile’), and how much was in other sectors.

Seeds (pure fractal flame) Artist: Cory Ench via Fractal World Gallery

Seeds (pure fractal flame)
Artist: Cory Ench via Fractal World Gallery

In brief, Jubak recommended DuPont. Why? Because the company had none of Monsanto’s patent problems, was shedding its non-seed businesses and buying up seed companies, and was the most focused of the three on the core: Creating and selling seeds.

Why should investors want seed companies in their portfolio? As Jubak said, “By 2050 the world will have a population of 9 billion (very scary) and the world’s farmers will need to double grain production in the face of losses of farmland to urbanization, desertification, drought and pollution.

“That means getting more calories from the world’s food plants by improving yields, by increasing resistance to disease and pests, and by expanding farm production to land that is now marginal because of climate or rainfall (while at the same time resisting attacks on global food production from changes in climate and an increasing incidence of drought.”

For what it’s worth, Jubak was mostly right: Since the article was written in July 2013, Dupont‘s stock has gone up by 16.6 %, Monsant0‘s by 12.59%, and Syngenta‘s has gone down by 6.08%. If Monsanto was going to suffer from the loss of its patents, it hasn’t come through in its stock price.

Now, what’s the point of looking at seeds from an investor’s perspective?

Genetic Code Revisited  Artist: Cory Ench via Fractal World Gallery

Genetic Code Revisited
Artist: Cory Ench via Fractal World Gallery

Because that’s what seeds are. You can see them as an investment in the baldest sense of financial gain, without the baggage of other concerns except as a motivating investment factor.

You can also see them as an investment in the future in terms of feeding the planet, maintaining and promoting biodiversity (both plant and animal), enriching lives and soil, and as a continuation of what we as humans have been doing for millennia.

The two views don’t have to be mutually exclusive, but for the moment, it seems that they are.

 

*Current bans on use of glyphosate products are in force in Denmark, El Salvador and Sri Lanka.

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