BOSTON ( TheStreet) --The severe drought and heat conditions in the nation's heartland is devastating crops, which will result in higher food prices.But the event is likely to be a long-term boon to companies developing drought-resistant seeds through the use of biotechnology. The government recently reported the drought is the worst in more than 50 years, with about 56% of the continental U.S. suffering from a moderate to severe water shortage, which is part of a worldwide trend attributed in part to global warming. That's resulting in huge corn and soybean crop failures. That means that demand for drought-resistant seeds and other such products should benefit a select few agricultural companies that have histories of applying technology to seed development. The biggest players in the market are Monsanto ( MON), DuPont ( DD) and Sygenta ( SYT). These firms have applied biotechnological approaches to plant and fruit genetics, resulting in genetically modified seeds that make them resistant to pests and herbicides, which helps improve crop yields significantly. As a result of their success, they've been readily adopted by U.S. farmers. Now about 90% of the nation's corn and soybean crops include genetically modified traits, though not necessarily of the drought-resistant kind. But critics claim such seeds can potentially be harmful to the environment since they allow for the use of pesticides that are dangerous to the environment or to humans. Instead, they favor organically grown crops. Europe in particular has fought the use of genetically modified seeds by its farmers. As a result, there is a continuing battle over the use of genetically modified seeds and the potential for increased government oversight of their development and use. Nevertheless, the increasing growing demand for food given the rising world population, coupled with rapid climate change, is likely to result in wider acceptance of new seed technologies. New applications are being developed and introduced each year. For example, in addition to its work on drought-tolerant corn, Monsanto is engineering cotton, wheat and sugar cane seeds that have been genetically modified. The fertilizers and agricultural chemicals sector of stocks, as tracked by Standard & Poor's, is among the top-performing categories this year, with an 18.4% gain this year, including 7% in the past three months, versus the S&P 500's 10.5% rise. Here is a snapshot of the three international agricultural firms most likely to see growth in demand for their seed and protective chemical products:
Monsanto Company profile: Monsanto, with a market value of $45 billion, produces leading seed brands and develops biotechnology traits that assist farmers in controlling insects and weeds, and provides other seed companies with genetic material and biotech traits. Its Roundup herbicides are used for agricultural, industrial and residential weed control. Seeds and genomics made up 73% of sales and 87% of gross profits in its 2011 fiscal year. Dividend Yield:1.43% Investor takeaway: Its shares are up 23% this year, including 11.6% over the past three months, and have a three-year, average annual return of 5.5%. Over 10 years the average return is an amazing 28% annually. Analysts give its shares eight "buy" ratings, six "buy/holds" and eight "holds," according to a survey of analysts by S&P. For fiscal year 2012, analysts' consensus earnings estimate is for $3.74 per share, and that that will grow 15% to $4.29 per share next year. Standard & Poor's says, "Monsanto's shares trade at a valuation premium to the S&P 500, reflecting what we see as above average earnings growth prospects. We forecast primary contributors being the introduction of next-generation seeds, and increased trait penetration in international markets, like South America." E.I. du Pont de Nemours Company profile: DuPont, with a market value of $45 billion, is a broadly diversified company, and known chiefly as the second-largest U.S. chemicals manufacturer. Its agricultural segment, which made up 24% of sales in 2011 and $1.5 billion of operating profit, includes Pioneer HiBred, the world's largest seed company, including corn and soybeans. The company is also a major global supplier of crop protection chemicals. Dividend Yield: 3.62% Investor takeaway: Its shares are up 5.7% this year and have a three-year, average annual return of 24%. Analysts give its shares four "buy" ratings, four "buy/holds" and 13 "holds," according to a survey of analysts by S&P, with the "holds" reflecting valuation concerns. For fiscal year 2012, analysts' consensus estimate calls for earnings of $4.26 per share, (up 16% over the prior year), and analysts estimate that earnings per share will grow by 11% to $4.72 in 2013. Morningstar says DuPont's genetically modified seed business should "account for the lion's share of future growth for the company in both North America and emerging markets." Syngenta AG Company profile: Syngenta, a Swiss firm with a market value of $30 billion, operates worldwide selling crop protection in the form of herbicides, insecticides and fungicides, as well as a developer of a wide variety of seeds. Among its latest products is Invinsa, which is the first spray-on product to protect field crops from drought. Dividend Yield: 2.19% Investor takeaway: Its shares are up 15% this year and have a three-year, average annual return of 13%. Analysts give its shares one "buy" rating and six "holds," according to a survey of analysts by S&P. For fiscal year 2012, analysts estimate it will earn $4.34 (up 25% year-over-year) and that that will grow by 13% to $4.89 per share next year. Morningstar analysts say that "with competitors concentrating on corn and soybeans, Syngenta has gained a solid position in the vegetable seeds market. The company expects this segment to grow as emerging regions demand more high-value vegetables in their diets."