Monsanto Company (MON), E I Du Pont De Nemours And Co (DD), Mosaic Co (MOS): 3 Fertilizer Companies Favoring Expansion

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Editor’s Note: This article has been amended to more accurately reflect the details of Potash Corp (NYSE:POT)’s dividend.

The world population is expected to increase from 7 billion in 2012 to about 7.2 billion in 2014. With the increase in population, the global demand for agricultural products is on the rise. To increase the quantity of the agricultural produce, the quality of soil needs to be enhanced by efficient farming practices. This creates a huge opportunity for fertilizer companies.

Looking at these opportunities in the agricultural sector, I have chosen three companies that are using advanced technologies to produce high quality fertilizers to increase their market share.

Creating a monopoly

genetically modified foods

Monsanto Company (NYSE:MONand its rival E I Du Pont De Nemours And Co (NYSE:DD) collectively hold more than half of the U.S. seeds market, amounting to $34 billion. Both companies entered into a new licensing deal in March 2013. This deal will create a monopoly in the seed industry, resulting in higher revenue for both. Under this deal, E I Du Pont De Nemours And Co (NYSE:DD) will pay a royalty of $1.75 billion for 10 years to Monsanto, and will get a license to sell its “Genuity Roundup Ready 2 Yield” in the U.S. and Canada by 2014. By 2015, DuPont will also be able to sell “Genuity Roundup Ready 2 Xtend,” after it receives regulatory approval.

Genuity Roundup Ready 2 Yield is designed to provide farmers additional herbicide tolerant soybean, and Genuity Roundup Ready 2 Xtend provides the highest production opportunity to produce more beans. Under the deal, Monsanto Company (NYSE:MON) will also have access to DuPont’s disease-resistant and corn-defoliation patents.

Monsanto Company (NYSE:MON) generates 60% of its revenue from genetically modified organisms, or GMO seeds. In GMO, the DNA of a seed is modified to produce a high-yielding, fertile plant. The crops grown from GMO seeds are considered unhealthy, but the company has the shield of the Monsanto Protection Act, which prevents the U.S. government from banning the consumption of genetically modified crops.

The company’s total revenue increased by 15% year-over-year to $5.47 billion in the quarter ending February 2013, which was mainly driven by the sales of GMO seeds in emerging markets like Brazil, Argentina, and other Latin American countries. In a one-year period, the company has witnessed an increase of 14% in the total annual revenue of $13.5 billion in the fiscal year 2012, with the help of the GMO segment.

On the path of continuous growth

Mosaic Co (NYSE:MOS) is planning to take over Cargill, a privately owned company, from which Mosaic was split-off in 2011. Cargill has 286 million Mosaic shares, which include the 129 million shares owned by its Charitable Trust. Mosaic shares were allotted to the trust, with a lock-in period of two years, ending on May 26, 2013. After the end of the lock-in period, the takeover will be tax-free for both the companies and their shareholders. Mosaic Co (NYSE:MOS) has more than $7.3 billion cash available at present for the deal.

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