December 5, 2009

DuPont delays launch of next-generation corn, soy seeds
 

DuPont Co. pushed back its timelines for the North American release of its Optimum GAT corn and soy seeds, which have a special herbicide tolerance and provide high yields, though one analyst suggested the impact on the chemical giant will be muted in the short term as the technology wasn't expected to be meaningful for a number of years.

Still, DuPont's shares fell 3.6 percent to US$33.54 in recent trading despite a broad market rally. The stock earlier hit an intraday low of US$32.47 but has risen 5.8 percent in the past three months as DuPont has scrambled to cut costs amid lower demand. Meanwhile, shares of seed rival Monsanto Co. climbed 2.8 percent to US$84.41.

Paul Schickler, president of DuPont's Pioneer Hi-Bred business, said on a conference call that the delay shouldn't be viewed as a failure or departure from the business' commitment to the optimum gap technology.

Schickler added the soy seeds are seeing "excellent and superior results, but it is corn where we have the problem."

The corn seeds have shown sufficient herbicide tolerance, but it doesn't meet Pioneer's high-yield standards. Because of that, Pioneer said it has "reset its plans" to commercialise the seed and won't have controlled releases in 2010 and 2011 in North America.

Pioneer said it would intensify its research efforts and "work toward commercialisation in the middle of the next decade."

The company also said its Optimum GAT soy will be commercialised two to three years later than their anticipated 2011 introduction because of changes in regulatory policy in key import markets.

Ticonderoga Securities analyst Chris Shaw said the news is negative for DuPont in the longer term, as Optimum GAT wasn't expected to be meaningful for a number of years.

Still, without as many new traits to offer, DuPont may be forced to compete on price, Shaw said. "This strategy could lead to lower average selling prices realised by all players," said Shaw. "Additionally, with this new delay, DuPont's recent licensing of Dow's DHT herbicide resistant trait could now receive greater focus as a new product in soy for DuPont."

DuPont likely delayed the rollout because farmers are increasingly scrutinising the performance of seed varieties as prices rise and the company was worried Optimum GAT wouldn't meet expectations, said Don Roose, president of US Commodities in West Des Moines, Iowa. He added farmers are willing to shell out for improved varieties, but they need stronger yield results.

"If you're going to unroll a new variety, it needs to really perform," Roose said.

There is a lot of chatter in farm communities about which seed varieties performed well after a challenging year in which the corn and soy harvests were delayed by wet weather. DuPont's announcement shouldn't affect farmers' planting plans for next year because there are "a tonne" of other varieties they can use, Roose said.

"This is very competitive out here in the seed world," he said.

Meanwhile, DuPont reaffirmed its outlook for greater than 15 percent compounded annual earnings growth at its agriculture and nutrition business segment through 2013.