Outlook bright for agricultural products

Advances in biotech research should alleviate concerns about the widespread use of genetically modified seeds.

By Trefis Aug 15, 2012 11:47AM
Image: Corn field (© Bob Rashid/Brand X/Corbis)

The global agricultural products industry has been growing at a fast pace over the past few years, registering strong positive growth even during the 2008-09 recession. Further, it's projected to continue its rapid expansion.

This bodes well for chemical giants Dow (DOW) and DuPont (DD), which are becoming increasingly reliant on their agricultural divisions to drive growth.

The agricultural products industry primarily develops and manufactures pesticides and genetically modified seeds.

Genetically modified (GM) seeds are seeing widespread adoption by the agricultural sector, especially in the U.S., where farmers are using biotech seeds to grow corn, soybean, cotton and other crops. This has become a worldwide trend, with the global planted area of GM crops growing 8% in the previous year.

Dow Chemical Global Agricultural Products Market

GM seeds are highly resistant to herbicides, have higher yields than their natural counterparts, and are more resistant to extreme climate conditions and pests. These properties have caused them to grow in popularity among the agricultural industry. There are still many health issues related to these products though, as a result of which a number of governments are apprehensive about allowing widespread use of the seeds. However, we believe that advances in biotechnology research will alleviate such concerns in the long term, and this will further spur the growth of the industry.


Other factors to consider include the global population growth, which will increase demand for food crops required for sustenance; food price inflation, which has been a widespread problem over the past decade; and the adoption of biogas in a number of countries, which has increased demand for products such as corn and oil seeds.


On the other hand, pesticides are coming under increased scrutiny, and safer alternatives to these products are being developed. We believe that this segment of the agricultural products market could see gradual decline over the long term. However, this will be offset by the growth of the seeds industry. We project a net annual growth of 4.4% over our forecast period.


More from TrefisTrefis

Tags: DDDOW
0Comments

DATA PROVIDERS

Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.

STOCK SCOUTER

StockScouter rates stocks from 1 to 10, with 10 being the best, using a system of advanced mathematics to determine a stock's expected risk and return. Ratings are displayed on a bell curve, meaning there will be fewer ratings of 1 and 10 and far more of 4 through 7.

116
116 rated 1
284
284 rated 2
461
461 rated 3
671
671 rated 4
628
628 rated 5
618
618 rated 6
615
615 rated 7
495
495 rated 8
347
347 rated 9
115
115 rated 10
12345678910

Top Picks

SYMBOLNAMERATING
DYNDYNEGY Inc10
TAT&T Inc9
VZVERIZON COMMUNICATIONS9
EXCEXELON CORPORATION8
AAPLAPPLE Inc10
More

VIDEO ON MSN MONEY

ABOUT

Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.

Contributors include professional investors and journalists affiliated with MSN Money.

Follow us on Twitter @topstocksmsn.