Sept. 14 (Bloomberg) -- Dow Chemical Co. and Monsanto Co. will cross-license technologies to create corn seeds with eight genetic modifications that improve resistance to insects and weed killers, topping products from rival DuPont Co.

The seeds may be available to growers by the end of the decade, Midland, Michigan-based Dow said today in a statement. The companies will pay each other royalties to license seeds and genetic technologies, St. Louis-based Monsanto said in a statement. Financial terms weren't disclosed.

Monsanto, the world's biggest seed maker, gains technology to offer eight gene modifications as DuPont boosts production of seeds with three improved traits. Dow Chief Executive Officer Andrew Liveris said the deal will make the company the third- biggest U.S. corn seed producer, up from fifth. Demand for modified seeds is growing over continued objections in Europe.

``The eight-stack is a game-changing technology,'' Liveris told analysts and investors in a conference call. ``The fact that Monsanto, which is the unquestioned leader in biotechnology, is partnering with Dow tells us that our research efforts are paying off.''

The agreement is worth hundreds of millions of dollars in profit to Dow over the next decade and could approach $1 billion as the seed segment grows, Liveris said.

Only one of the eight gene modifications lacks U.S. regulatory approval, giving the companies confidence that the new seeds will be available to farmers in three years, Jerome Peribere, president of Dow AgroSciences, said in an interview.

`Dow's Commitment'

``This agreement shows Dow's commitment to put its Ag business back on the map, with a far broader range of product offerings than it has had thus far,'' Credit Suisse analyst Mark W. Connelly said in a report. He rates Dow shares ``neutral'' and doesn't rate Monsanto.

Dow fell 2 cents to $41.98 at 4:19 p.m. in New York Stock Exchange composite trading. Monsanto gained $1.13, or 1.6 percent, to $73.50, a record closing price. The gain gives Monsanto a $40.1 billion market value, surpassing Dow for the first time.

So-called SmartStax corn will include two types of herbicide tolerance and four types of insect resistance, Dow and Monsanto said. Eight genetic changes are needed to create the six traits because some insect-resistance traits require two modifications.

SmartStax will become Monsanto's primary insect-resistant corn in the next decade, Carl Casale, Monsanto executive vice president of strategy and operations, said in an interview. Combining technologies may boost farmers' yields by controlling 99 percent of certain insect populations, up from about 90 percent, he said.

`Pricing Proposition'

``That's the pricing proposition to the farmer,'' Casale said. ``Whoever can deliver the highest yield is going to be successful in the marketplace.''

The idea to partner with Dow first arose during patent disputes, Casale said. Monsanto began validating the eight-gene stack in tests last year and expanded it to 56 trials this year, he said.

After the U.S., SmartStax will be introduced in Brazil and Argentina, he said. Monsanto plans to enhance the seeds with drought resistance and the ability to absorb nitrogen better when those traits become available, he said.

The new seeds may allow Dow to surpass No. 4 AgReliant Genetics, based in Westfield, Indiana, and No. 3 Syngenta AG of Basel, Switzerland, Peribere said.

Market Share

Monsanto this year gained as much as 6 percentage points of U.S. corn-seed sales for a 33 percent share of the market, surpassing Wilmington, Delaware-based DuPont's Pioneer unit, which had a 30 percent share. Monsanto's sales have been buoyed by demand for seeds that resist Roundup weed killer, below-ground insects such as the rootworm, and above-ground insects such as the corn borer.

A so-called triple stack of those technologies accounted for 42 percent of sales for Monsanto's Dekalb brand and will make up more than half of sales in 2008, the company said last month. DuPont's triple stack accounted for 10 percent of U.S. corn seed sales this year and may reach 33 percent in 2008, the company said in April.

SmartStax corn seed will combine Monsanto's triple-stack technology with Dow's Herculex insect control and Liberty Link herbicide resistance, licensed from Bayer AG. The agreement allows the companies to add additional gene modifications.

Herculex, Roundup

DuPont already stacks five genes in corn seed that has Herculex insect control and Roundup resistance, and the company is examining strategies to improve insect control, spokesman Doyle Karr said.

``We feel very good about our competitive position in the near term and the long term,'' Karr said.

U.S. farmers planted 92.9 million acres of corn this year, up 19 percent from a year earlier, as demand for grain-based ethanol boosted prices in February to the highest in a decade. The U.S. planted 73 percent of this year's crop with seeds produced from biotechnology, up from 61 percent last year, the USDA estimates.

Dow and Monsanto said they will ask the U.S. Environmental Protection Agency to lift a requirement that growers of insect- resistant corn also plant 20 percent of their land with conventional corn to prevent pests from developing resistance to the technology.

The European Union lifted a six-year moratorium on approving new gene-altered foods in 2004 after the World Trade Organization ruled the ban was illegal. The bloc tightened labeling rules and created a food agency to screen biotech applications. Since then, the EU has approved imports of some modified products for food and animal feed, though not for cultivation.

To contact the reporter on this story: Jack Kaskey in New York at jkaskey@bloomberg.net.

Last Updated: September 14, 2007 16:33 EDT