By Ross Kelly
SYDNEY--Monsanto Co. (MON) is replacing Nufarm Ltd. (NUF.AU) as
the distributor of its crop protection products in Australia and
New Zealand, ending a decade-long deal worth 100 million Australian
dollars (US$102.4 million) in sales a year.
The move comes as global agriculture companies vie for a greater
share of Australia's farm sector, which is located on the doorstep
of fast-growing Asian economies like China that have a growing
appetite for Western-style diets. Australia is the world's
second-largest exporter of wheat in the world after the U.S., and
also produces large amounts of sugar and cotton.
Nufarm shares fell 12% Tuesday after it confirmed an agreement
struck with Monsanto in 2002 for exclusive use of its Roundup brand
will cease Aug. 28.
It is the second major contract loss for Nufarm in as many
months after chemicals company BASF SE (BAS.XE) said in January it
will re-enter the Australian farm market as a solo player when a
distribution pact with Nufarm ends early in 2014. The German
company intends to use the Australian footprint of its recently
acquired Becker Underwood business for the relaunch.
Monsanto said a new regional distribution partner for Roundup
will be named "in the near future. The company attributed its
decision to terminate the deal with Nufarm to "changes in the
glyphosate market in recent years and better alternatives to serve
its customers in Australia and New Zealand". An Australia-based
spokesman for Monsanto wouldn't elaborate further.
Other distribution arrangements with Nufarm for Roundup will
continue, including as the exclusive distributor in Indonesia,
Monsanto said.
The U.S. company was involved in a long-running legal dispute
with Nufarm over cost sharing related to the distribution pact, but
that was settled back in 2011.
Melbourne-based Nufarm currently accounts for about half the
glyphosate sales in Australia. Around 60% of those involve products
marketed under the Roundup brand, which Nufarm said were worth
about A$100 million in the year to June 30.
Increasing competition in the glyphosate market is pressuring
suppliers, Nufarm said.
"The brand premium attached to Roundup has consequently been
eroded and we will now focus our ongoing investment in glyphosate
on Nufarm's own brands where we can build long-term value on a more
secure basis and ensure our cost competitiveness," it added.
The end of the Monsanto contract isn't expected to have a
"material" impact on earnings, Nufarm said, partly because it will
no longer have to pay a distribution fee to Monsanto.
However, by the close of trade in Sydney, Nufarm shares had
fallen 67 cents, or 12.1%, to A$4.85. They were trading at A$6.33
immediately before news of the BASF contract termination on Jan.
23.
Write to Ross Kelly at ross.kelly@wsj.com
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