Motley Fool: This FDA Test Could Devastate Monsanto Inc.
Uh-oh. This can't be good for Monsanto (NYSE:MON). As if the chemicals giant didn't have enough on its plate already trying to deal with unfavorable currency exchange rates and lower prices for seeds, which just caused it to slash its earnings outlook for the year, the Food and Drug Administration recently announced it will begin testing food samples for traces of glyphosate, a development that could really bring the hammer down.
Glyphosate is the primary active ingredient in Monsanto's best-selling herbicide Roundup, but because the chemical permeates almost every aspect of its business, the findings of the FDA tests could rock Monsanto to its core.
A systemic problem:
When sprayed on weeds and plants, glyphosate is devastating, killing it root and all. Sales of Roundup, when including both the product and the revenue realized from genetically modification seed sales, account for about half of Monsanto's total $15 billion in annual revenue.
But the killer chemical has been under pressure lately. The glyphosate market is suffering a glut of generic versions on the market, causing prices to fall. In taking an axe to its guidance, Monsanto said the pricing pressure was taking a toll on its agricultural productivity segment, which consists of the crop-protection products and lawn-and-garden herbicide products, most notably Roundup. Moreover, competition from other herbicides, like Dow Chemical's (NYSE
OW) Enlist Weed Control System, are also eating away at sales.
There is also a broader growing resistance to the use of such chemicals. After years of overapplication of herbicides and pesticides, nature is fighting back, developing superweeds and superbugs resistant to their use. It's one of the reasons Dow Chemical is excited about GMO seeds now approved to withstand the withering effects of its Enlist system. Since nature is growing immune to Roundup, it should generate big sales of its competing 2,4-D herbicide. It's also why Monsanto wanted to buy the Swiss chemical corporation Syngenta (NYSE:SYT) to get at its crop protection portfolio, though that deal ultimately fell through.
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http://www.fool.com/investing/general/2016/03/05/this-fda-test-could-devastate-monsanto-inc.aspx?source=eptfxblnk0000004
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