Microbial products | The companies want to develop seed treatments from naturally occurring bacteria and fungi
Monsanto says a deal with Novozymes to form a long-term research and development alliance should accelerate the release of microbial-based products designed to improve crop production.
For farmers, the partnership should result in new seed treatments and topical applications for crops manufactured from naturally occurring bacteria and fungi, said officials with both companies.
Monsanto is known for its development of genetically modified crops and Roundup herbicide. The company has broad global market share of GM corn and soybeans.
However, increasing weed and pest resistance to Roundup and other crop protection chemicals has been a mounting problem.
The work in microbials could help address some of those concerns but has broader implications for im-proved production and sustain-ability, using bacteria and fungi to optimize the performance of crops. Row crops as well as fruit and vegetables are target areas for product research.
The deal with Novozymes provides an “important head start” for Monsanto’s work in this area and will help create more value for farmers faster, said Robb Fraley, Monsanto’s chief technology officer.
Novozymes added Philom Bios, a Saskatoon inoculant manufacturer, in 2007.
Analysts said while the biological work is not likely to offer a near-term revenue boost, it does hold long-term promise.
“I like the transaction. This is a brand new opportunity,” said BGC Financial equity research analyst Mark Gulley.
“This supplements Monsanto’s current crop protection portfolio.”
Seed treatments in a group of core crops, including corn, soybeans, wheat, cotton, canola, fruit and vegetables, is a priority for the near term, the companies said. Development of spray applications could follow.
Biologicals are used to complement or replace agricultural chemical products and represent a growing market segment of $2.3 billion in annual sales, according to Monsanto.
Novozymes has an established commercial business in microbials, offering products that improve fertility, yield and help control disease. Revenue from its bio-ag portfolio was $120 million last year.
In the deal with Novozymes, Monsanto will make an upfront payment of $300 million and establish the BioAg Alliance, which joins Novozymes’ microbial discovery work with Monsanto’s commercial capabilities, the companies said.