Monsanto Ends Australia, New Zealand Distribution Pact With Nufarm

   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 [e-mail]

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