Sector Wrap: Agricultural Chemicals

Agricultural Chemicals Gain As Analyst Offers Bright Outlook for Genetically Modified Seeds

NEW YORK (AP) -- Shares of agricultural chemical companies rose on Wednesday, after a Credit Suisse analyst forecast strong demand for genetically modified seeds while beginning coverage of several companies in the sector.

Credit Suisse's M.W. Connelly said genetically modified seeds will help meet rising demand for food in emerging markets that have greater urgency to feed growing populations.

Connelly expects the sector to "stage a strong comeback" in 2008, with strong pricing driving profit, and rated the industry "Overweight."

Connelly started Monsanto Co. at "Neutral" with a $131 price target and forecast gains from Roundup herbicide and a deal with Dow AgroSciences for SmartStax, a new corn seed more resistant to bugs and weeds. Monsanto and Dow are developing and marketing SmartStax and hope to have the product to market by the end of the decade.

"After the stunning success with the corn triple stack, Monsanto has first mover advantage again with SmartStax, and we expect a similar outcome this time around," Connelly wrote in a client note.

Shares of Monsanto rose $3.53, or 3.2 percent, to $115.25.

Meanwhile, Connelly started DuPont Co. at "Outperform" with a $57 price target but said DuPont trails Monsanto in the seed segment and isn't likely to catch up.
However, Connelly said investors are underestimating the value in DuPont's BioScience pipeline,
which Connelly thinks will deliver "a rich source of opportunity and profit."

Dupont advanced 87 cents to $47.30.

Also, Connelly started Syngenta AG at "Outperform" and touted its position in seeds and traditional chemicals, in addition to margin improvement and Syngenta's ability to generate cash. Shares rose $1.41, or 2.5 percent, to $58.24.