Zacks_Analysts' Blog : Monsanto, Sinochem to Seal Ties - Analyst Blog

Global agribusiness Monsanto Company (MON) hopes to strengthen its tie with Sinochem, the Chinese chemicals conglomerate. At present, the two companies are in talks regarding the economic and politically sensitive issues, which were a topic for debate for months.

The agreement is anticipated to include a large joint venture following the sale of a minority stake. This might increase Sinochem’s possibilities of marketing Monsanto’s products in China.

Monsanto dominates in crop biotechnology and the patented genes invented by the company can be found in about 90% of the soybeans grown in the U.S. and in approximately 80% of U.S. corn. These genes help the plants to become tolerant when exposed to Monsanto's popular Roundup herbicide or produce their own insecticides.

Beijing-based Sinochem, the importer and distributor of fertilizer and large seed producer, has a similar role in China along with the responsibility of ensuring food security in China. They are thus expanding internationally in order to procure supply lines and technology to feed the country’s 1.34 billion population.

Monsanto already had a hybrid corn seed joint venture with Sinochem's National Seed since 2001. However, in February, Government banned the foreign companies, who are investing in the Chinese Bio-technology sector and decided to breed its own high-yield seeds as a food security measure controlling volatile food prices. This came as a blow to the Western agricultural companies operating in China's corn seed market.

Moreover, the genetically modified (GMO) seeds, except cotton and papaya, were not expected to be a priority in Beijing for at least five years, as they desired to control Biotechnology and food supply themselves.

However, during late 2009, China approved the use of genetically modified strains of rice and corn and is expected to give consent for its commercial production by 2012. On this backdrop, deeper ties between Monsanto and Sinochem indicates growing acceptance in China for the U.S Biotechnology and GMO.

Missouri-based Monsanto Company is a leading global provider of agricultural products for farmers in the United States and internationally. Monsanto’s biotechnology research and innovations enhance the company’s rich product pipeline, thereby providing market leadership above its peers, such as Syngenta AG (SYT), The Scotts Miracle-Gro Co (SMG), The Dow Chemical Company (DOW), BASF SE (BASFY.PK).