Monsanto killing DuPont insecticide sales with new Intacta soybeans

Monsanto Co.’s new Intacta soybeans are not only killing bugs on Brazilian farms. They’re crushing demand for insecticides made by competitors DuPont Co. and FMC Corp.

Intacta soybeans, which are genetically engineered for the Latin America market to produce their own insecticide, will be planted on 35 million acres during the current growing season, St. Louis-based Monsanto said Wednesday on a conference call to discuss fiscal second-quarter results. That exceeds the company’s 30 million-acre forecast and is more than double the 15 million acres planted last year.

Intacta’s success is hurting pesticide makers. DuPont last week said it won’t restart a Texas factory that makes Lannate insecticide partly because "insect resistant crops" have eroded sales. Intacta is causing “a structural shift in demand" for certain above-ground insecticides, said Brett Wong, an analyst at Piper Jaffray. The seeds are taking sales from chemical producers such as FMC, Dow Chemical Co., Syngenta AG and Bayer AG, he said.
"Intacta is disruptive to crop-chemical demand for sure, but it impacts everyone differently," Wong said by phone Wednesday.

The intensity of crop-chomping bugs probably makes Brazil the largest insecticide market in the world, said Wong, who toured the country last week. Soybean growers in northern Brazil who normally make six to 10 insecticide applications a season require only one or two sprays with Intacta crops. Farmers in the central part of the country have less insect pressure, but still cut insecticide use enough with Intacta beans to make the additional seed cost worth the investment, Wong said.

FMC’s soybean insecticides mostly target different pests than those controlled by Intacta, so the beans have "little impact" on sales, said Jim Fitzwater, a spokesman for the Philadelphia-based company. Platform Specialty Products Inc. has lower exposure to soybean insecticides in Latin America than its competitors, the company said on a Feb. 29 conference call.

Intacta is cutting insecticide use enough to impact results for all the insecticide producers operating in Latin America said Christopher Perrella, an analyst at Bloomberg Intelligence.

“It should be an issue for all these guys in the first quarter,” Perrella said by phone Wednesday.

75 Million Acres

The pain is far from over for the insecticide sellers. Monsanto is boosting seed production in Brazil and expects to more than double Intacta plantings to 75 million acres by 2019, Chief Operating Officer Brett Begemann said on the call. The company aims to eventually have Intacta planted on 100 million acres a year, he said.

Intacta isn’t the only factor cutting into insecticide sales. Lower than normal pest populations, high insecticide inventories and a depressed Brazilian currency also are bedeviling chemical producers this year, Perrella said. Intacta, however, looks like it will be a perennial drag on sales.

“The other factors could fall away, but if Monsanto continues to grow market share of Intacta, it’s going to continue having a negative impact on insecticide sales” in Latin America, Perrella said.