Delta & Pine Land: This Cotton Is No Puffball

The U.S. king of genetically altered cottonseed finds a big market overseas for its pricey but resilient seed

When Murray Robinson joined Delta & Pine Land Co. (DLP ) in 1988 as executive vice-president, the 18-year veteran of the agricultural seed business made a curious discovery: With the exception of the CEO, no one at the company--named for the rural Delta and Piney Woods area of Mississippi where it is based--owned a passport. Because the 77-year-old cottonseed company sold only to U.S. farmers, nobody needed one. But Robinson, now 67 and CEO, says he soon realized that "for this company to grow long-term, it would have to participate globally."

His well-worn passport now bears stamps from China (the company's most important foreign market), Australia, Turkey, and many of the 13 other nations where Delta sells its popular herbicide-tolerant, insect-resistant genetically modified cottonseed as well as conventional seed. Overseas sales account for 10% of revenues and are growing 35% annually. And international business is so strong that Delta, No. 42 on the Hot Growth list, has had to start building a special management group with experience in foreign cultures. The company's global outlook has helped generate an average 20% annual rise in sales over the past three years and a 142% average annual rise in profits. Meanwhile, Delta already has a lock on the U.S. market, with an 85% share of sales of genetically altered cottonseed.

The genetic material in those seeds was developed by Monsanto Co. (MON ) But it is Delta seeds that carry the benefits of altered genes to the farmer. The relationship between the two companies continues even after a merger agreement fell apart in 1999 when Monsanto, says Delta, rejected changes that the Justice Dept. required to approve the deal. Monsanto paid Delta an $81 million breakup fee, but Delta is still suing Monsanto for $2 billion, charging breach of contract. The companies continue to do business because it is mutually beneficial. Delta gets the genetic material and Monsanto receives a cut of the revenue when farmers buy the seed. "It really has not impeded the progress of business," says Robinson. Monsanto will keep working with Delta, but says it also expects to win the lawsuit.

"ENVIRONMENTALLY FRIENDLY." The company's altered cottonseed costs three to four times as much as conventional seed. But it pays for itself in savings on herbicide, insecticide, and even fuel, since farmers make fewer trips to inspect or spray crops. Kenneth Hood, whose Gunnison (Miss.) family grows 10,000 acres of cotton, says the savings add up to $40 per acre. Plus, he says, "the seeds are more economically feasible and environmentally friendly." And, he could add, less controversial than genetically modified foods; cotton isn't eaten.

Still, analysts believe that Delta's biggest opportunities are abroad, where farmers crave Delta's pest-resistant seeds. In China, the world's third-largest cotton producer, Delta's seeds are already used by more than one million farmers--even though they're sold through joint ventures in only two of China's 23 provinces. "In the absence of biotechnology, this would not be a growth story," says analyst Daniel Ellefson of Security Investment Co. of Kansas City.

The only downside analysts see for Delta could become an upside for investors: With Delta's share price down to around $22, from the $54 reached three years ago, the company is now vulnerable to a takeover bid, perhaps by a European biotech firm. "It is a class-A takeover target," says Guy Wyser-Pratte, a New York money manager who holds 1.4 million Delta shares. But Robinson doesn't worry about that. "We don't try to envision what we'll be like in 10 years, because we're not that smart," he says. He just watches over business from Delta's incongruously sleek Art Deco headquarters--and keeps his passport ready.

By Aixa M. Pascual in Scott, Miss.

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