Super Seed Swap

Instead of continuing to fight each other in court, agribusiness companies Syngenta (NYSE: SYT) and Monsanto (NYSE: MON) called a truce for their never-ending patent disputes last week.

In the settlement, Monsanto gets a royalty-bearing license to Syngenta's technology to make crops tolerant to dicamba, an herbicide that kills weeds but not resistant crops. Syngenta gets a license to Monsanto's Roundup-tolerant and insect-protected corn borer traits.

Without knowing the royalty rates for the licenses, it's a little hard to know which company got the better deal. It's worth noting that both companies agreed to drop lawsuits against each other as part of the deal. It looks to me like Monsanto had more to lose with the lawsuits, because Syngenta was making antitrust claims against Monsanto. If Monsanto had lost, presumably that would have put other licensing deals in jeopardy.

The future of crops is multiple traits -- drought tolerance, herbicide resistance, and higher yield, for instance -- combined in one plant. We're already seeing the start of the stacked-trait era with products like Monsanto's SmartStax Corn. The crop, which should launch in 2010, will have eight generic modifications to improve its yield.

It's interesting how the companies are going about combining the traits that their competitors own. Monsanto has a deal with BASF to discover new traits, and Syngenta has a similar deal with DuPont's (NYSE: DD) Pioneer. Now all we need is a deal between DuPont and BASF and the circle will be complete.

If the companies continue this, it seems possible that eventually, all the seed manufacturers will be selling the same super seeds with traits developed by all the different companies. In the meantime, the deal between Monsanto and Syngenta should help both companies compete against their rivals.