Wheat Faces Potential Headwinds With Monsanto Investigation

By Commodity HQ  JUN 06, 2013 3:03 PM

Monsanto came under fire last week for unapproved genetically modified wheat and the investigation is ongoing; the whole wheat industry could suffer the consequences.

 


When it comes to agricultural commodities, wheat is perhaps one of the most important crops, as this resource is a dietary staple throughout both the emerging market and developed world. Because of this dependence, wheat prices tend to exhibit significant volatility, which can be triggered by a wide array of issues; anything from supply disruptions to extreme weather can easily send the commodity into a tailspin.

In recent weeks, the wheat industry has gotten significant attention from investors, as a number of events have placed significant headwinds in front of the popular commodity.

Monsanto Faces Investigation Over Unapproved GM Wheat

Monsanto (NYSE:MON), the world’s largest seed company and developer of genetically modified crops, came under fire last month after unapproved genetically modified wheat was discovered in an Oregon field by Oregon State University and the USDA. Almost immediately following the announcement, Japan and South Korea’s governments halted all purchases of US wheat in an effort to protect food supplies.

Currently, the US is the world’s top wheat exporter, with exports amounting to some 1.2 million tons to South Korea alone each year. As such, wheat futures have come under significant pressure as traders weigh the impacts of the bans.

This week, however, Monsanto finally responded to the media’s firestorm, stating that the unapproved GM wheat found in Oregon was an isolated incident and that the cause was likely due to an “accidental or purposeful mixing of seed” that was planted in the field. Despite the company’s insistence that it had no part in the unapproved genetic modification, the USDA and Oregon State University are still investigating the contamination.

Over the past week, shares of Monsanto have fallen nearly 5.8%. Year-to-date, however, the stock is up 6.2%.


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Editor's note: This article by Daniela Pylypczak was originally published on Commodity HQ.
No positions in stocks mentioned.