According to recent data from the U.S. Census Bureau, the
world's population has already crossed 7.1 billion and is likely
to surpass the 10 billion mark by 2055. Concerns about the
depletion of available natural resources have come to the
In order to address this issue, efforts are made to step-up
global crop production by expanding cultivable land area,
increasing the frequency of cropping and increasing yields.
However, despite sincere execution, certain impediments have
This has brought Genetically Modified Organisms (GMOs) into
play. GMOs are organisms whose genes have been altered using
various methods. These are the primary source of genetically
modified crops. However, over the years, the use of GMOs for the
society's well-being has been a hotly debated topic. While a
group of scientists considers GMOs to be environmentally
hazardous, others regard them as a necessity for increasing crop
Before we suggest the stocks that are poised to benefit from
the GMO backdrop, let us take a quick look at the advancement so
GMOs: The Pros & Cons
Supporters of the environment-safety movement argue that GMOs
might leak into the wild and altar ecosystems. However, it has
been proved that none of the crops is enduring enough to disrupt
the natural flora. Another concern revolves around the
possibilities of unintended genetic changes in the crop. It has
been argued that the process of gene insertion and tissue culture
can result in unintended genetic changes.
The other school of science believes that the advantages from
GMOs outpace the so-called negative effects. Not only are they
safe, but are also economically viable. Moreover, GMOs reduce the
use of synthetic chemical pesticides that are harmful to the
For a large number of genetically modified crops, the modified
genes never enter the food supply since they are removed during
processing. It has been proved that genetically modified sugar
beets are chemically equivalent to the non-modified ones, while
oil extracted from soybean, cottonseed and corn are identical to
oil from natural crops.
Adoption So Far
Based on positive feedback and an incessant need to feed the
growing population, some countries have accepted GMOs, although
with certain conditions. As on 2012, 42 countries in the European
Union (EU) along with other nations required the products
containing genetically modified components to be labeled. Some EU
countries including Switzerland, Austria and Hungary banned the
usage, while others have been selective in their approval.
However the biggest propagators, the U.S. and Canada, have
accepted GMOs without any adjustments.
Commercial usage of genetically modified crops was first
approved in 1996. Currently, the total plantation has increased
to 167 million acres of land worldwide. The U.S. is by far the
largest producer of these crops, accounting for two-thirds of the
world's production. The National Center for Food and Agricultural
Policy estimates that 85% of the U.S. corn is genetically
modified. Other modified crops include cotton, soybeans, canola,
squash and papaya.
Other regions that approve of the modified crops usage include
Argentina (modified soybeans), Canada (modified canola), China
and South Africa (modified cotton), and Brazil (modified
These crops are mostly needed when a natural calamity occurs
and when farmers are unable to produce the required yield through
the same resources. Proper usage of these crops lowers production
costs, reduces pest problems, lowers use of pesticides and
improves yield, per the National Research Council. Gauging from
these factors, we believe the future of the genetically modified
crops is bright.
3 Stocks to Benefit from the Wave
Of course, the direct beneficiaries would be the companies
that are manufacturing genetically modified crops. Here are three
such companies that we think would stand out:
): Based in Missouri, this Zacks Rank #3 (Hold) stock is
considered the biggest player in the modified foods industry. The
company's most accepted and widely used technology is the Roundup
Ready system for soybeans, developed in 1974. Monsanto is trading
at a forward P/E of 21.6x and has long-term expected earnings
growth rate of 13.5%.
E. I. du Pont de Nemours and Company
): Another major player in the genetically modified market is
DuPont. This Zacks Rank #3 stock offers protection for crops like
corn, cotton, potato, soybean, vegetable, rice, peanut and
tobacco. It is trading at a forward P/E of 15.2x and has a
long-term expected earnings growth rate of 8.5%.
The Dow Chemical Company
): This Zacks Rank #2 (Buy) stock deals with products like
crop-enhancing traits, healthy oils, residential pest control,
crop protection products, and vegetarian management solutions.
The company has a forward P/E of 16.8x and a long-term expected
earnings growth rate of 9.62%.
DU PONT (EI) DE (DD): Free Stock Analysis
DOW CHEMICAL (DOW): Free Stock Analysis
MONSANTO CO-NEW (MON): Free Stock Analysis
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